For many of the wealthiest families and individuals, investing is more than just building and preserving wealth. It’s about making a difference. Wealth provides people with the opportunity to support causes close to their hearts and make a real difference to the lives of others. Choosing to provide money to homeless charities, organisations fighting climate change or cash-strapped educational bodies can be hugely satisfying and make a lasting contribution to society.
The establishment of a foundation or trust can formalise charitable giving, providing a level of organisation that is likely to improve its impact. Some of the most widely known trusts and foundations have stemmed from the charitable and philanthropic aims of an individual or a family. The fields of education, science, health, social welfare, conservation, and public policy have all benefited enormously from the range of foundations already supporting a huge range of causes.
A foundation is a non-governmental organisation run on a non-profit basis, with assets provided by donors or from the wealth accrued by an individual or family. Those assets are managed by foundation officials directed by a manifesto, with assets used for the benefit of the outlined purposes. The impact of a foundation can be truly life-changing for beneficiaries and can lead to lasting positive change. For the individual or family, a foundation can provide a true sense of accomplishment and satisfaction.
The growth of giving
There has been a consistent growth in the level of grant-making by the UK’s top 300 foundations for a number of years now. A December 2021 report by the Association of Charitable Foundations showed that grant-making had risen from roughly GBP 2.72 billion in 2013/14 to GBP 3.48bn in 2019/20. Total private giving in the UK for 2019/20 was GBP 22.3bn.
While many high-income individuals may seek to establish a foundation in their retirement, the scale of the work entailed in getting such an organisation off the ground may either see them work more than they had anticipated or take a more of a hands-off approach than they had envisioned.
Starting a foundation or charitable organisation is much like starting a business. It requires specialist skills, expertise and guidance. Beyond developing a name, purpose and guidelines, ensuring that the body is legally and operationally sound is imperative. Your investment strategy is important. Even when you are making donations, capital preservation is a key tenet to maximising the benefit that wealth can provide to others. A strategy that can generate cash regularly to support annual grants or donations will have an impact for many years into the future. There are also significant tax breaks for charitable giving.
Often, high-income families will start foundations to create a legacy for both themselves as well as the institutions they have founded or worked for. Other times, a family may decide to establish a foundation in the name of a loved one to honour that individual, even after they have passed away. In doing this, a family can share the memory of someone with the wider community in a positive way, benefiting the lives of others. This also allows a family to participate in a common, bonding cause, establishing the groundwork for further charitable work in the future.
Speaking to the experts
Anyone considering establishing a foundation should speak to an experienced wealth adviser as a first step. Sitting down and discussing your giving priorities and also your financial capabilities will allow you to come up with an appropriate plan for your new venture. There are no hard and fast rules as to when you should do this with some feeling that retirement is the right time and others preferring to get started earlier. Whatever your view, planning early can ensure you give yourself the best chance of achieving your aims.
Establishing a foundation requires work, but it is ultimately a rewarding process. Ensuring the fruits of your labour can promote and support causes close to your heart for years to come can be positive both financially and emotionally. Doing good is hard work, but with the right help, it can be fulfilling for you and hugely beneficial for those who benefit.
At London & Capital, we want to ensure your wealth is working in the way you want it to. The establishment of a foundation can ensure that you leave a lasting legacy in life and we are here to help you achieve that.
