If charity work is important to you or your family, it may be time to consider philanthropy in your business succession or estate planning. Although many Australians become involved in charitable giving on an ad-hoc basis, charities love planned giving because it gives them more consistent funding streams and often increases the size of donations. In fact, a 2005 study called  “Giving Australia” found that planned gifts were on average four times greater than spontaneous gifts.a family discussion about succession, but don’t know how to begin, philanthropy, and discussions about family legacy can be a good place to start.Many professional disciplines intersect when creating a philanthropic structure within a business succession plan, including legal, tax, accounting, and financial planning, and discussing the finer points are beyond the scope of a column. However, I wanted to briefly discuss two common ways that business families approach philanthropy. family discussion about succession, but don’t know how to begin, philanthropy, and discussions about family legacy can be a good place to start.

The simplest and most popular approach is to create an annual gifting budget with your business or family. Through an annual gifting approach, business leaders and their families are able to make general charitable contributions out of family assets. As long as these gifts are made to deductible gift recipients (DGRs

Families with greater assets and a desire to create a lasting legacy can create a Private Ancillary Fund (PAF). PAFs are charitable funds established by a private entity to which individuals, families, and businesses can make tax-deductible donations. When significant cash assets will be generated during succession (such as after the sale of a business), a PAF can be funded by an initial irrevocable gift, to which additional capital can be added over time, as resources allow. These funds are required to disburse a certain percentage of their assets each year and are controlled by trustees. One of the primary advantages of a PAF is that donors are able to dictate the recipients of family funds while delegating the day-to-day management to professional fund managers.), families can realize tax deductions and reduce their owed income tax each year.

Philanthropy is also good for family business longevity. According to research conducted in 2004, family philanthropy is one of the factors associated with successful multi-generational businesses. Collective philanthropy creates opportunities to build familial connections and helps members preserve core family values. As an advisor, I see that business families that are able to create a lasting identity for their members are more successful at navigating the obstacles of succession and other important business transitions.

Succession planning and philanthropy are important issues for family business leaders to consider because they both deal with the idea of establishing a personal legacy. Taking care of loved ones and creating a future for the next generation are typically of great importance to a successful business leader. Similarly, incorporating philanthropy in your succession is a way to create a lasting legacy for yourself and your family. For example: Alfred Nobel isn’t remembered so much as the inventor of dynamite as the creator of the Nobel Prize, which still funds important scientific and social progress a century later. While we may not be able to create a legacy on par with his, we are still able to make very real, important contributions to society.

For more information on how to start forging your family legacy contact FINH on 07 3229 7333