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There have been 170 charitable family foundations established in the UK by HNWs since 2012*, shows new research by Boodle Hatfield, a leading private wealth law firm.
Boodle Hatfield says the large number of wealthy families setting up their own foundation reflects changing attitudes towards wealth, including a growing focus by wealthy individuals on ‘giving back’ to society to help deal with major geopolitical issues such as combatting climate change.
Charitable initiatives include The Giving Pledge, which has been signed by 236 Ultra High Net Worth’s, including Elon Musk, Mark Zuckerberg and Bill Gates, co-founder of the Pledge along with Warren Buffett. Signatories have promised to give away the majority of their estates to charity during their lifetime or upon their death.
Clare Stirzaker, Partner at Boodle Hatfield, says the trend for wealth distribution rather than wealth preservation continues to gain momentum, as exemplified by the owner of Patagonia this week announcing that the business has been structured, so as to give its profits in the future to fight climate change. “Families are increasingly assessing the purpose of their wealth and the legacy they want to create and leave behind to create meaningful societal change. The Patagonia announcement is a great example of a family who believe strongly that the success of their business should support the world in tackling the environmental crisis, which is an amazing legacy to create”.
Boodle Hatfield says that British HNWs are increasingly following philanthropic trends more commonly observed in the United States. Wealthy individuals in the US benefit from considerable tax breaks, which has helped incentivise large donations and the UK has also developed rules to support tax efficient giving, such as gift aid relief.
Family foundations are typically established by wealthy individuals in their family name. They are funded by the assets held by the family and family members often play a role in the running of the foundation. This can include deciding which charitable causes to donate to. Increasingly, family businesses are also being structured to give a percentage of their profits towards philanthropic causes.
Boodle Hatfield says the rise in the number of UHNWs created by the boom in sectors such as the UK’s technology sector over the last 20 years has accelerated the increase in philanthropy. It is argued that entrepreneurs who have created their own fortunes typically feel less constrained about giving their money to charitable causes than those who have inherited their wealth. Clare Stirzaker flags that they typically adopt a similarly entrepreneurial approach in the philanthropic approach, “developing a much greater strategic focus on the causes they wish to focus on and critiquing how they can use their skills and experience to help tackle unresolved societal problems”.
Kyra Motley, Partner at Boodle Hatfield, says establishing a foundation can also be a valuable way for older members of a family to instil philanthropic values in the next generation and ensure that the family’s legacy lives on after their death.
Kyra Motley explains: “There has been a real step change in attitudes towards philanthropy in the last decade. Setting up a family foundation has become increasingly popular amongst HNWs and is now an integral part of multigenerational wealth planning for many of these families.”
“Many UHNWs are now deciding that they don’t just want to give all of their money to their children when they die. Instead, they are choosing to pass on a legacy of sharing, not just accumulating, wealth.”
“By getting their children involved in these foundations at an early stage, they can help them learn valuable skills, such as managing a portfolio, choosing charitable causes to help and doing due diligence to make sure that these reflect the values of the family.”
*Charity Commission, year-end July 31st
This article was first published in eprivateclient on Monday 26 September.
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