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Chartered Accountants

Trusted advisers of all tax compliance and annual accounting issues facing both individuals and small businesses.

Charitable Trusts

What is a charitable trust?

A charitable trust is specifically set up to hold and protect assets for charitable purposes

It can be set up to aid in the relief of poverty, the advancement of education or religion, or any other matter for the public benefit

How does it work?

Trustees are appointed to administer the charitable trust, and ensure the assets are invested to provide lasting benefits and your (you being the Settlor) intentions are carried out long after you’re gone, or before your’e gone

You can decide the purpose to benefit and how; and you can donate as much as you want and will receive a tax credit up to a maximum of 1/3rd of your income

Case Study

Mrs A is nearing 90 yo, has no dependants, her Estate is valued at $10M, of which $5M is effectively in cash assets.

Apart from some specific legacies to friends, her Will leaves the bulk of her estate to charity.

I am her executor.  Her Will is a very short document leaving me very little guidance on her death.

What did we do……..

  1. with the assistance of a lawyer we established a Charitable Trust which was registered with the Charities Commission
  2. in year 1 Mrs A donated $500,000 and received a donation tax credit of $165,000, her income was very high this year due to the winding up of her business
  3. in each subsequent year the intention is that she donates up to the level of her income, normally about $50,000 per annum
  4. in some years a donation may not be made if the annual sustainable spending analysis indicates her cash and investments may not outlive her
  5. during her lifetime the charitable trust makes annual distributions to a wide variety of charitable causes that would not otherwise benefit until after Mrs A’s gone
  6. the fulfilment Mrs A gets from presenting annual distributions is immeasurable
  7. and she gets 1/3rd back each year in donation tax credits which would not be available after she has gone

 

 

 

 

 

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