The efforts of charitable individuals make our world a better place. For generous individuals and families looking to engage in philanthropy, there are many avenues available. In fact, there are so many, that it can become easy to give on a whim without full consideration of the long term consequences or missed opportunities. The decision-making process of where and how to give should not be taken lightly, nor should the financial implications surrounding these decisions.
Properly Structuring your Philanthropy
Properly structuring your philanthropy can make it significantly more tax-effective. Using the right structure can increase your contribution to worthy causes, and reduce the amount which is ‘lost’ to taxes. It can also provide opportunities to strategically manage your personal tax liability.
A particularly relevant example is the use of a private ancillary fund. In the right circumstances, a private ancillary fund can provide greater control over the timing of tax benefits, while also providing the opportunity to engage in more meaningful, sustainable ways with your chosen charities. You can even redirect your support as your giving needs change.
An alternative approach exists through a public ancillary fund. A public ancillary fund provides a communal philanthropic structure that offers a simpler and more immediate route to gifting. The involvement of a professional board and trustee reduces the administrative burden that falls to you, while also reduces your level of control over the investments and grant-making decisions.
The right choice for you will depend on your personal circumstances, desired level of involvement as well as your overall financial objectives. Discuss your options with your adviser in the context of your larger financial picture.
Leaving a Lasting Legacy
Your approach to strategic gifting and philanthropy should also align with other elements of your financial plan. For example, your estate plan, could be a particularly effective way of supporting worthy causes. Philanthropic gifts can be used as a tool within your estate plan to manage taxes, move assets, and transfer wealth to the next generation, while ensuring you’re leaving a lasting impact.
When structuring your estate plan, you should fully consider your personal motivations for giving, what you have to give, and conversely what constraints may exists as a result of your other financial goals. As with all elements of your philanthropic plan, it’s important to get good advice, as there are many technical and legal elements that need to align in order to maximise the your contribution and its positive overall impact on your plan.
Even more importantly, you should ensure your family is involved in the process. Set aside time to discuss your passions, and how you’d like to see your philanthropic efforts realised. Engaging your family and involving them in your plans will help you pass your values, in addition to your assets, on to your heirs. Creating a philanthropic mindset in the younger generations of your family could have a greater impact than any financial arrangement you make.
Maximising the Impact of Your Philanthropy
Whether you’re starting out with a modest charitable approach, or embarking on a larger scale philanthropic plan, the right guidance can help. Your Morgan Stanley financial adviser can help ensure you are considering all of your personal objectives and making sensible strategic decisions that will maximise your impact. We look forward to helping you fulfil your philanthropic aspirations.
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