Should my client set up a charitable foundation?

If you have high-net worth clients, chances are some of them have at least thought about setting up a charitable foundation. Maybe they’ve recently experienced a liquidity event like the sale of a business, or they’re just keen to start building a charitable legacy. Whatever the reason, they’ve reached the stage where they want to be more intentional about their philanthropic giving, and they want your help.

Fortunately, there’s more than one way for a client to structure their giving. Which is right for your client really depends on their unique situation.

Donor advised funds (DAFs), sometimes called ‘charitable giving accounts’, are growing in popularity in the UK. They’re low-hassle, tax-friendly ways to set aside money for charitable giving.

By contrast, charitable trusts or foundations are a bit more old-school. They are actual charities with a board and reporting requirements, but they can also offer more control over exactly what your money is used for. Both are good options for people wanting to be more strategic with their giving. Here are some of the differences:

There’s a growing number of both charities and for-profit organisations that offer donor advised funds in the UK. Charities Aid Foundation offers what they call a ‘charitable trust,’ and PrismNational Philanthropic Trust-UK and most community foundations offer their equivalent of a donor advised fund. On the for-profit side, UBS recently launched its own DAF.

If you and your client decide a foundation’s the way to go, you may want the help of other professionals like a tax accountant, as there’s some administrative set-up required. Another option is to turn to a charity like Giving Works or a community foundation that specialises in managing the reporting and administrative responsibilities of private foundations.

Whatever you and your client decide, know that that you’ve helped your client start the journey to more strategic–and hopefully a lot more meaningful–charitable giving.

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