Investing forever

Investing in your community forever

Liz Koh
Deputy Chair
Nikau Foundation
13 June 2018

New Zealanders have always been good at giving to others. Whether it is selling sausages, baking for a cake stall or running errands for elderly neighbours, most Kiwis pitch in at some stage in their lives to lend a helping hand. Our generosity is also to be seen on collection days for charities and in the regular donations made to favourite organisations. Some people are lucky enough to have more money than they will ever spend in their lifetime. For the super-rich, establishing a trust or foundation to make charitable distributions is a way of using surplus wealth to benefit others. The Tindall Foundation, JR McKenzie Trust and Todd Foundation are examples of such organisations which will continue to do good things beyond the lifespan of their founder donors.

Setting up your own charitable trust is an expensive and complex business. It involves preparing the trust deed, administration of the trust, making charitable donations and compliance with regulations for charitable organisations. Smaller trusts often struggle to find trustees once the founder donor has passed away, and poor management often results in funds diminishing over time to a point where meaningful donations can no longer be made.

A simple solution for those with a philanthropic bent but without a massive fortune is to establish a donor-advised endowment fund where funds are invested and the returns distributed in accordance with directives from the donor.  Endowment funds are cheaper to administer, more tax efficient and flexible to operate. They can be established with modest amounts of money, making them accessible to everyone. Community Foundations of New Zealand is a network of sixteen local community foundations which offer donor-advised endowment funds. They provide an easy and inexpensive way for people to invest part of their wealth forever, for the benefit of their local community.

Liz Koh is an Authorised Financial Adviser (www.moneymax.co.nz ) and Deputy Chair at Wellington’s Nikau Foundation. 

An example of Endowment Fund growth since 2003:

* Image example from Acorn Foundation

A more strategic way to give

A more strategic way for clients to give

Bill-Holland---Chair

By Bill Holland, Partner, Holland Beckett Law
CFNZ Board member
24 August 2017 

As a lawyer I think it’s a privilege of developing what can be very strong and longstanding relationships with my clients.  They come to us as trusted advisers, seeking guidance on a range of issues, and sometimes not of a strictly legal nature.

As professionals, it is definitely not for us to be telling clients what they should be doing in their Wills. It is incumbent on us however to fully advise our clients of options that are available when making a Will.

People without children who have worked hard to establish their financial security are sometimes genuinely frustrated at just not knowing what to do with their estates.  For these people, the idea of making a positive difference to their community on a permanent basis by having income paid to their chosen charity every year forever, is a very attractive one.

Likewise, parents with children naturally want to help their children first, but many love the idea of leaving, say, 10% of their estate to their local Community Foundation to provide that same long-term benefit to their community.

As a lawyer, I often know my clients very well.  When they seek my advice on their making their Wills, the discussion can often lead to charitable giving and I then explain that could be either a direct gift to a charity or a permanent endowment gift through a community foundation.  My experience has been that most seem to prefer endowment giving.

I have never sensed any resentment from clients for having raised the option of charitable giving.  On the contrary, I have had many clients who have become very enthusiastic.  Not only have they made provision for in their Wills, but in many cases they have chosen to start giving while they are living.  One client said, “It is better to give with a warm hand than a cold one”, but then she confessed that what was even better was getting the 33% tax refund on her gift!

If you are a lawyer or professional financial advisor and you are not familiar with your local Community Foundation already, I suggest that you get in touch. They are a powerful connector of generosity to local causes and, as a lawyer, your role in the process is key.

 

See Bill Holland’s article in the New Zealand Law Society’s Lawtalk magazine

Hear Bill Holland’s interview on Radio NZ all about Community Foundations – 12 October 2017

Contact your local Community Foundation