Advice for first-time philanthropists: How to make a positive difference

First published in The Business.

For those who are fortunate enough to be able to share their wealth, philanthropy can be a deeply satisfying activity.

It is important to plan carefully so your donations are in line with your values and have the maximum possible benefit. It is wise to take expert legal advice to ensure that you comply with all relevant regulatory duties.

Alexis Graham, a Partner in our Private Wealth and Tax team, talked to two of our firm’s clients about the rewards and the challenges of setting up and running a charitable trust. They chose to remain anonymous.

Why did you set up a charitable trust?

We are in the fortunate position of having excess capital and we want to help causes that align with our values. We were struck by the number of charities which receive insufficient or no funding from the government.

Giving money to charities is advantageous from a tax point of view, of course, but the main motivation was to make a positive difference.

You’ve been engaged in philanthropy through your charitable trust for just over a year now. Have you found it be to a rewarding experience?

Absolutely. It’s rewarding to feel like we’re helping people and the environment. Every time we send out an invitation to apply for funding, or email a charity to inform them that their application has been successful, we get a real buzz from imagining their reaction.

We’ve been told by several charities that their staff have cried with joy and relief when they received our donation, so it can be a very humbling experience too.

Visiting some of the charities and building relationships with their staff, volunteers and service users is another rewarding, and very interesting, aspect.

Whilst it is time-consuming, seeing the beneficiaries’ projects in action enables us to really understand what differences our potential donations could make. It’s uplifting to see the positive impacts our grants have made – a before and after picture, if you like – either by receiving a report from the charity, or from re-visiting a project.

How do you decide which charities to fund?

That’s a good question – there are so many worthwhile charities that it can be challenging to choose which ones to help.

Before setting up the trust, we considered what sort of causes we wished to support and then we chose the charitable objectives (as set by the regulator) which aligned with our values.

We identify charities that deliver relevant services and then research what projects those charities currently run, what their future aspirations are, and in what ways people or the environment will benefit from our donation.

We check how stable the charities are financially and in terms of trustee continuity.

We examine their accounts to ascertain what funds they currently have, how long their reserves would last, what their income and expenditure are, and whether they seem to spend their cash appropriately. We particularly seek projects with match funding opportunities, or where our donation will provide good value in terms of cost per head.

Are administration and management a big part of the process?

Yes, very much so. Less so for us because Shepherd and Wedderburn take care of our trust’s financial and governance administration.

However, we do spend a considerable amount of time researching potential beneficiaries and their projects.

Once all the trustees have approved a grant, we inform the beneficiary of the good news and then S+W arrange the payment.

We chose to use the S+W client account for convenience, added security and greater protection than the Financial Services Compensation Scheme’s £85k limit.

What advice would you give people who are considering setting up a charitable trust?

We’d encourage them to do it, because it’s very rewarding and so many charities are struggling to provide their services.

Explore your values and choose the sectors and locations of causes you’d like to support. Consider your trust’s funding, lifespan, management and administration.

Naturally, it’s important to seek legal and financial advice and we’re grateful for S+W’s guidance in those matters.

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