Aoife Quinn Associate Director, Financial Planning
16th October, 2018
The way in which individuals and companies are giving to charities is changing. Brian Walsh and Aoife Quinn outline how wealth managers are dealing with the evolving philanthropic needs of their clients.
Against a backdrop of strong economic growth, and increasing wealth , philanthropy has re-emerged as an objective for individuals, businesses and their advisers as they see areas in the country where they believe they can make a long term difference .
Ireland has always had a strong tradition of charitable giving however, for many years this took the form of once-off, spontaneous donations to various appeals, collections and fundraising events. In recent years though, this trend has begun to change with a move towards more structured giving and a renewed interest in establishment of charitable foundations.
Demographics are also a factor in this: for the first time there is a generation of individuals in Ireland in their 50s, 60s and 70s with significant self-created wealth. These individuals are beginning to think about if, when and how they will pass on their wealth and for some these succession plans will involve the creation of a charitable legacy.
In the latest Davy Voice of the Client survey carried out by Davy Private Clients in 2018 , 13% of 1,008 clients surveyed identified the creation of a philanthropic legacy as a key financial goal.
Philanthropy can mean different things to different people, however for those interested in establishing a longer term legacy the conversation tends to centre around:
Establishing a charitable foundation can be a way of achieving the above objectives.
A charitable foundation is a platform for supporting long-term, sustainable donation strategies by an individual, family or group, as opposed to a once-off donation. Charitable foundations can take many forms but typically the intention is that any money donated to the charitable foundation is invested, with the returns and capital subsequently being distributed for the purpose of making donations to one or a number of nominated charities.
Against this backdrop of a growing interest in charitable foundations, the regulatory and reporting environment for charities themselves has become increasingly challenging. Those thinking of establishing their own foundations will face upfront and ongoing hurdles from a governance, administration and regulatory perspective. The challenge for client advisers is to help facilitate their clients in a way that fulfils their philanthropic objectives without being overly onerous or costly from an administration or governance perspective.
In Davy, we have been able to facilitate certain clients in this regard, through helping the establishment of sub-funds under our umbrella charitable foundation, the Davy Charitable Foundation Service.
The Murphy family was interested in setting aside a pool of capital to support a number of causes over along-term time horizon. The family wished to create their own giving strategy and monitor the impact of their donations over time. They made a donation to DCFS, with the relevant tax reliefs applying. DCFS established a sub-account in the family name. The Murphy family can now make suggestions to the board in terms of how they would like the monies to be invested and distributed.
The Davy Charitable Foundation Service was established to provide a charitable foundation platform for clients who wish to create their own giving strategy and monitor the impact of their donations over time. The DCFS platform enables our clients to have the user experience of having their own charitable foundation without the upfront costs, administration, governance and reporting that would be required if individual or companies were to establish their own foundation.
Key features of DCFS include:
The DCFS platform may be of interest to those who have resources which they wish to direct to good causes in a structured way. We can discuss the platform with our clients in the course of general estate and succession planning meetings. There is no ‘typical client’ with regard to philanthropy but some recent expressions of interest have come from the following:
Depending on the legal status of the entity donating the funds, there will be different tax relief implications:
Source: Revenue 2018
Once the foundation is established, regular board meetings would take place to review investment performance, donation strategy and the impact of support on the individual’s selected causes. An individual or family might consider involving the next generation at this point, while a company might consider involving its employees.
If you would like to hear more about how to establish a charitable legacy, please contact Brian Walsh on +353 1 614 8889 or Aoife Quinn on +353 1 614 9967.
Warning: The information contained in this article is based on Davy’s understanding of current tax legislation in Ireland and is subject to change without notice. It is intended as a guide only and not as a substitute for professional advice. Please note that Davy does not provide tax or legal advice, nor accept liability for it. The information provided is for Irish resident, Irish ordinarily resident and Irish domiciled individuals only and is based on our understanding of Irish tax legislation and the known current Revenue interpretation thereof. This may vary according to individual circumstances and is subject to change without notice. The information provided does not constitute legal or tax advice, and you should consult your own professional advisors as to the implications of your subscribing for, purchasing, holding, switching or disposing of shares under the laws of any jurisdiction in which you may be subject to tax. You should consult your tax advisor for the rules that apply in your own individual circumstances. Davy is not responsible for the interpretation of this information and any submissions made by you or a third party on your behalf thereon.
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