Philanthropy Impact

Inspiring philanthropy and social investment across borders, sectors and causes

Lifetime or legacy giving

 

Highlights

  • 'Giving whilst living' allows donors to get involved with the causes they support and see the difference they make but many people are also concerned about their own savings.
  • If you choose to  give through a charitable foundation one important question is whether it will exist in perpetuity or 'spend out' over a fixed period. 
Read more about Lifetime or legacy giving

 

There is a balance to strike between committing resources to charitable causes during your lifetime and leaving money to charity in your will. ‘Giving whilst living’ allows you to see the difference your contribution is making and get actively involved in supporting the cause. However, many people may like to be generous to charities but concerned about their own savings in which case legacy giving maybe more appropriate.
    
If you decide to give through a charitable foundation one key decision is whether the foundation will exist in perpetuity, distributing the investment income and preserving capital, or whether you want it to ‘spend out’ over a fixed period.

When planning your giving strategy, it’s important to begin by focusing on your overall aims, and identify what kind of giving will help you achieve those aims. Key factors include how you want to allocate your resources for yourself and your family over your lifetime and afterwards, how personally involved you want to be in decisions about giving, and what you want your money to achieve.

Lifetime giving
For giving during your lifetime, there are many different ways this can be carried out but it is important maximise the impact of your donations by giving tax effectively. See giving mechanisms for more on which charitable vehicle is most suitable for you, and tax efficient giving on giving tax effectively .

Legacy giving
Charitable bequests can form part of your estate planning. Bequests can be made to specific charities named in your will, which is a gratifying way to know that you have contributed to the long term financial security of that organisation. Alternatively you can also choose to set up a charitable foundation through which to channel donations both during your lifetime and afterwards. See legacies for more on the specific ways of leaving money to charities in your will and the tax advantages of legacies.

Permanent endowment
By choosing to permanently endow a foundation you can ensure you have a long term impact on issues, and provide a secure resource for future generations to draw upon. It is particularly appropriate if you are passionate about problems you believe will be with us forever.

Giving in perpetuity can also provide a focus for family engagement across generations, encouraging family members to work collaboratively towards the ends established by the founder. Permanently endowed UK trusts and foundations are required by law to preserve their endowments, and in doing so to balance the needs of present and future beneficiaries. As founder, the challenge is to create a clear, flexible statement of your charitable intentions so your philanthropy can remain responsive to changing to needs over time.

Spend out foundations
Spend out foundations are established to spend down their capital over a fixed period. They differ from traditional foundations which exist in perpetuity, spending only the interest and preserving the original capital investment. Foundations which plan to spend capital have greater flexibility to increase giving in times of greater needs, whereas those spending only investment income may have fewer resources during any economic downturns.

The spend out model can be suitable for donors who want their money to be given in a high impact and strategic way and remaining closely connected to their passions. It is also suitable for those donors who want to contribute their own particular skills or knowledge. Some founders recognise that it can be difficult to preserve their intentions across generations, and fear mission drift and a decline in passion for the cause if their funds are given in perpetuity. Others believe that future generations should generate their own philanthropy, and are concerned that family members will view distributing someone else’s money as an administrative burden rather than a passion.

Most spend out trusts will establish a specific timeframe (ie, to be spent over the next twenty years, or within ten years after the founder’s death). But they can remain flexible and respond to events as they near the expected time to close. It is vital for spend out foundations to be clear with grantees about their timescales and either help them prepare for the funding to cease, or build relationships with grantees in preparation for a large grant or endowment to be made in the final phase of spend out.

Glossary: expendable endowment, legacy, lifetime legacies, permanent endowment, spending out

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