Tax incentives have always played a part in charitable giving, especially for the wealthy, and this is worth exploring with younger generations who are earning enough to benefit.
Of course, philanthropy depends on the person, and not everyone does it to achieve a tax benefit, but depending on the client's situation, there can be inheritance tax benefits built within it, and obviously Gift Aid.
Under current tax rules, giving land and property direct to charity is exempt from Capital Gains Tax and Inheritance Tax. Clients can even claim Income Tax relief on the value of the gift.
Coulson says too often advisers are not putting philanthropy into their mix, but for him and his company, “it comes as normal financial advice", especially if you factor the tax benefits into the overall plan.
DAF
Donor Advised Funds are a popular way to give money philanthropically and are established under an umbrella charity which administers the account on behalf of the donor.
The 2023 Donor-Advised Fund Report from the National Philanthropic Trust found in the year grants from DAFs to other charities were £554.7mn, an increase of 21 per cent compared with the previous year.
The report concluded this area is expected to grow as awareness of the vehicles increases among wealth managers.
Greer also thinks this is an area financial advisers can help people with philanthropic giving. He believes advice on the tax implications is vital, as it would be for any other investment.
He adds: “Philanthropy can be an incredibly personal act that can reveal so much about a person, their motivations and their priorities.
“As philanthropy advisers, we know it is essential to understand a client’s motivations and values, as well as the mechanisms available to them, for their giving to be as effective as it can be.
“Including the subject of philanthropy in an initial fact-find provides a brilliant opportunity to get to know a client better and develop a relationship. And it provides multiple touchpoints with clients because charitable giving can be done in so many ways throughout a lifetime."
He adds that, as tax incentives have long played a crucial role in encouraging charitable giving, it’s essential that donors receive advice from qualified financial advisers on any tax implications relating to their donations, just as they would with any other major outgoing or investment."
The transfer of wealth to the next generation could also be a conversation starter around charitable giving.
