Many clients and families have spent decades building wealth and there often comes a point when clients ask about doing more with their wealth than just spending, increasing or preserving it. This can often lead to conversations around supporting the charitable sector and areas that are important to the individual.
Before long, our conversation tends to centre around the amount of a potential gift and ‘how much is too much?’ There is something of a two-way pull here between clients’ desire to leave a legacy and to support causes important to them and to ensure they are not so charitable that they cannot fund their lifestyle and goals in later life, along with some provision for later-life care.
It is always worth taking a step back at this juncture to look at your overall financial circumstances. As the years have passed, we can often find that clients have regular expenditure that they do not need and a change to regular outgoings can release regular funds for charitable giving.
Alternatively, there are sometimes shares or fund holdings that have large gains and are arguably surplus to the client’s requirements. Rather than selling these and giving the funds to charity (and thereby incurring a capital gains tax charge), is it better to simply gift the investment to the charity, rather than the cash proceeds? The charity can then sell the investment and spend the proceeds, free of capital gains tax.
Sometimes clients are concerned that charitable giving in their lifetime can adversely impact the amount of inheritance their children or family members may receive upon their passing. An option here may be to consider some lifetime gifting so that you can be content in the knowledge that regardless of the level of your charitable giving, your family and friends have received at least some of your wealth, with perhaps further in the future from your estate.
Finally, we can make some assumptions on future returns and forecast the impact of withdrawing from a portfolio (i.e. making charitable gifts) over time. Whilst the chances of our forecast being 100% correct are rather low (life has a habit of not following a linear path) it may provide a useful guide as to the impact. Depending on whether you are in the ‘accumulation’ stage of your wealth journey or the ‘decumulation’ stage, you might be happy with very different outcomes of this wealth forecasting.
Whichever way you choose, it is important to bear in mind that there are always several options. Our world is rather complicated and amongst other things, you and your advisers must take into account your stage of life, individual needs, tax, possible future needs and current mix of investment assets.
I hope the above gives some food for thought and promotes a further discussion around sustainable charitable giving to support worthy causes.
Nothing on this website should be construed as personal advice based on your circumstances. No news or research item is a personal recommendation to deal.