Steven McKnight of McKnight Associates Wealth Management explains why more and more people are using their money to help good causes.
When a company owner sells their stake in a business they have often built from the ground up, they can be left wondering “what’s next?”
For many prominent entrepreneurs, the answer comes from philanthropy and charitable giving.
A great amount of people who’ve done well are doing charitable giving – from the extremely large Bill and Melinda Gates Foundation right down.
Locally, the Wood Foundation and Denis Law Legacy Trust are well known for supporting charities.
It’s a great way to get involved with causes and issues that you are truly passionate about and want to make a positive impact. It can be something you are personally connected to or not, but I find my clients all want to end suffering and help create positive options for people or animals or the environment.
Although setting up a charitable trust can be an extremely involved task if you decide to do it yourself, with organisations like the Charities Aid Foundation (CAF) the work of establishing a trust and handling the logistics of it is dealt with – for a small fee.
Before you start setting up a trust, there are a few things to consider:
- The amount of money you have to give to charity – this is the most important first step. You still have to have enough to take care of yourself and any dependants, so a deep dive into your financial situation is vital.
- Ensure you have family who are enthusiastic about the trust’s work – hopefully, the trust will become a lasting family legacy and to guarantee it continues, it’s important for future generations to be involved and engaged.
- Do some research – there are many registered charities in the UK, so you should really know where your money is going and how effective it will be. I’ve seen charities that spend up to two-thirds of donations on running the charity, rather than helping people. Don’t give your money to charities that operate like businesses, because it would be more effective elsewhere.
With a CAF charitable trust, you name the decision-makers and they manage how the money is distributed.
Unlike grant-giving organisations, trusts choose where the money goes, rather than accepting applications.
It also means the donations are done strategically, rather than bit by bit. You can create and adapt your giving plan to ensure it has the biggest impact in the areas you want to support – and it’s not always with the biggest charities.
When a family does this together, it actually becomes a social exercise as well as philanthropy because it gets them around a table together to make decisions and have interesting conversations that make a difference.
It also instils that charitable ethos in generations moving forward.
And yes, there are tax benefits to charitable giving. Firstly, for the charity you can claim gift aid, which adds 25% to the amount donated. There are also instances where you can claim capital gains tax relief.
But for many more of my clients, it’s the happiness and sense of satisfaction they have from helping others that is the biggest motivator and it’s something that is growing year-on-year.
It is also something that brings me great inspiration, along with many others I’m sure.
- The levels and bases of taxation and reliefs from taxation can change at any time. Tax relief is dependent on individual circumstances. To find out more about setting up a philanthropic or charitable giving plan, visit Steven McKnight’s website or call 01224 202402 to arrange an appointment.
McKnight Associates Wealth Management is an appointed representative of and represents only St. James’s Place Wealth Management plc (which is authorised and regulated by the Financial Conduct Authority) for the purpose of advising solely on the group’s wealth management products and services, more details of which are set out on the group’s website sjp.co.uk/products. Trusts are not regulated by the Financial Conduct Authority.