Foundations are the choice for big givers

GOVERNMENT spending cuts will have a major impact on public services, putting more pressure on charities. Indeed, in David Cameron’s “big society” charities will become more important than ever. Luckily, wealthy individuals are increasingly showing an interest in giving, perhaps inspired by the examples of Bill Gates and Warren Buffett.

But if you are thinking of giving, what is the best way? At Maurice Turnor Gardner we recently surveyed customers on the question and found that 80 per cent said that if they had £2m to dedicate to charity, they would set up their own foundation instead of donating it to an existing charity or foundation set up by someone else. The overwhelming majority of respondents wanted to identify a specific – sometimes as-yet unknown – cause and cultivate it.

One benefit of foundations is that they allow you flexibility to capture the tax relief at a point in time that is most advantageous to you, without having to fully commit yourself to who the ultimate charitable recipients are going to be. Cynics will suggest that giving is driven by tax efficiency, but half of survey respondents did not see tax as the major driver for their philanthropy. However, once they had decided to give, then they would all do so in the most tax-efficient way.

Our survey also revealed an increased appetite for “sunset clauses” in charitable giving. This means that there should be no legal requirement to spend money within a fixed period of time in the UK (although US private charitable foundations have to give away at least 5 per cent of their assets each year). UK donors are increasingly looking to prescribe a time limit by which funds donated by them must be spent, as donors often feel that their funds will have a greater impact if spent quickly at a time when their charitable objectives are clearly understood.

Family-controlled foundations are increasingly popular because they allow giving to be highly personalised, are a mechanism for involving different generations of the family, and provide a succession plan for the family’s philanthropy for the future.

Jennifer Chambers is a partner at law firm Maurice Turnor Gardner LLP