Effective philanthropy starts with a clear connection between your charitable objectives, family values, and long-term financial planning.
Giving during your lifetime can allow you to see the impact of your donations while potentially improving tax effectiveness.
Professional investment and governance frameworks can help charitable capital support beneficiaries over a longer period.
A more prosperous global society makes for a more charitable one. As countries develop and grow wealthier, so too do philanthropic efforts. Along with the rise of charitable efforts, the philanthropy world has become more professional and developed; in this, the US leads the way. Two trends we are seeing in the US are redefining the field:
The rise of “no strings attached giving”. Novelist and philanthropist Mackenzie Scott is leading the charge of this somewhat ‘new’ version (i.e. not tying the capital to a particular program), having donated more than US$16 billion from 2019 to 2023; and
An increasingly professional industry, making philanthropy simpler for private individuals.
What Does This Increasing Professionalism Look Like in Practice?
Donors today have access to more sophisticated governance frameworks, specialist advisers, improved reporting standards and dedicated charitable structures than were available a generation ago. This has made it easier to establish and manage long-term giving programs that are aligned with specific charitable objectives.
The increasing professionalism is having a profound impact on the way private individuals can manage their philanthropic efforts, particularly in enabling greater longevity in their gifting programs. With proper investment management and guidance, individuals are now able to better manage donations over time, in terms of both tax efficiency and investment strategy.
Whether it is given via your time or your hard-earned money, consider the cause to which you are giving. Choose something that is meaningful to you and your family. Common areas of philanthropic efforts are:
- Health
- Education
- Social welfare
- Religious causes
- Human rights
- Animal welfare
Donations to deductible gift recipients (DGRs) are tax deductible in the name of the donor. Registered charities usually qualify as a DGR, but some community organisations will not. Before making a donation, it is worth checking the status of the charity or organisation you are gifting to.
If the donation is deductible, the deduction should be made in the name of the family member with the highest marginal tax rate to ensure the donation is tax effective.
Philanthropy efforts can sometimes be deferred until the death of the prospective donor, with their Will directing the flow of part of the estate to a charitable organisation.
However, to get the most out of your gifts and donations, consider gifting capital or part of your income in your lifetime rather than leaving it to your executors to handle. This has two principal benefits:
1. You can see the impact of your donation in your lifetime.
2. Any tax deduction for the donation can reduce taxable income in your lifetime.
Your estate intentions should reflect your philanthropic objectives and your historical philanthropic endeavours. Philanthropy can also provide an opportunity to involve future generations in family decision-making. For many families, charitable giving serves not only as a way to transfer wealth, but also as a means of passing on values, responsibility and a shared sense of purpose. When incorporated into a broader family stewardship framework, philanthropy can become an enduring part of a family's legacy. Through your Will, you can include specific bequests to causes close to you, or alternatively establish a Private Ancillary Fund (detailed below). However, be wary of ensuring your Fund meets the various regulatory requirements, such as having at least one founding director meet the ‘responsible person’ requirements.
If you actively gift to your chosen charities during your lifetime, make sure your Will takes account of previous donations so that other beneficiaries’ entitlement is not inadvertently reduced.
For private philanthropists with capital earmarked for charitable causes, there are two ways to establish a privately-directed charitable giving program:
1. Private Ancillary Fund, or
2. Public Ancillary Fund.
Key elements that distinguish the two fund types are outlined below.
Generally, the quantum of the philanthropic capital will determine whether a public or private ancillary fund will be most suitable to your needs.
For example, a donor seeking a simpler administrative structure may find a Public Ancillary Fund appropriate, whereas a family wishing to take a more active role in governance, investment oversight and grant-making decisions may prefer a Private Ancillary Fund. The appropriate structure will depend on both the level of capital involved and the family's charitable objectives.
The number of private funds has increased steadily since the turn of the century. There are now over 2,000 private ancillary funds in existence, compared to near zero in the year 2000, clearly indicating more widespread awareness.
Increasing professionalism of the philanthropy industry dictates a more professional approach to the management of philanthropic capital. A ‘Cash + Term Deposit’ approach may not be the right fit. Donors need to consider purpose and longevity as part of the investment strategy. A well-constructed investment strategy can help philanthropic capital support beneficiaries over a longer period, balancing current funding requirements with future charitable opportunities.
Setting the strategy for a private charitable fund is similar to the approach to personal capital, but can be more prescriptive in asset-liability management. Our approach involves planning, setting objectives, constructing an investment policy, and then operating the strategy to a defined program. It is a methodical approach that is tailored to suit philanthropic investors.
Cameron Harrison’s approach to managing philanthropic capital provides a meaningful solution for private investors seeking to establish a legacy with longevity and purpose. Our framework is outlined below. As partners in your philanthropic journey, it is important to plan for success to achieve your charitable objectives.
A Private Ancillary Fund (PAF) is a charitable trust structure that allows individuals and families to establish their own philanthropic vehicle. Donors retain significant involvement in governance, investment oversight and grant-making decisions, while complying with regulatory obligations. PAFs are often used by families seeking a long-term and structured approach to charitable giving.
The primary difference is the level of control and responsibility. A Public Ancillary Fund is administered by an external trustee or charitable organisation, making it a simpler option for donors. A Private Ancillary Fund provides greater flexibility and direct involvement but comes with additional governance, compliance and administrative obligations. The most suitable structure typically depends on the amount of capital involved and the family's philanthropic objectives.
Both approaches can play an important role in a philanthropic strategy. Lifetime giving allows donors to see the impact of their contributions and potentially receive available tax benefits. Estate-based giving enables individuals to leave a lasting charitable legacy through their Will. Many families choose a combination of both, integrating philanthropy into their broader estate and wealth planning objectives.
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