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How giving to charity can bring a family together

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Do you have a cause that you are passionate about? Do you involve your children in it? Giving to a charity can strengthen families.

As soon as you start giving kids money, teach them about saving part of it for a good cause.

Tabitha Lovett, the general manager, philanthropy, at Equity Trustees, often asks people who are keen to donate which are the issues in life that trouble them.

"I ask, 'What are the causes that you feel you need to support? What does your family want to be connected with?' "

How giving to charity can bring a family together

Giving to a good cause will develop family togetherness.

"They are talking about the world, about equity, disparity and helping. People think how fortunate they are," Lovett says.

There are many causes: sick children, remote indigenous communities, refugees, climate change, endangered animals, medical research or scholarships for the disadvantaged.

There are also many different ways to contribute.

You can make a donation to a charity and, if it has the status of a deductible gift recipient (DGR), you can claim a tax deduction.

Another way is to set up a philanthropic trust.

You don't need to be wealthy to do this; you can start with as little as $20,000.

Since 2011 families have been allowed to set up a private ancillary fund (PAF) and get a tax deduction for their philanthropy.

At Equity Trustees, Lovett is in charge of managing 450 charitable trusts that distribute a total $80 million each year.

An advantage of setting up a philanthropic trust and adhering to tax office guidelines is that it is tax effective.

Lovett says there are three main types of philanthropic vehicles: a sub-fund within a public ancillary fund that requires minimum capital of $20,000; a private ancillary fund that needs a minimum of around $300,000; and a testamentary trust with $50,000.

You set up the first two while you are still alive whereas a testamentary trust is created in your will.

But an obvious issue in setting up a charity that begins operating after you die is that you aren't around to experience the good deeds.

Also family members are notorious for challenging a will over the mental capacity of the benefactor, so your intentions could get thwarted.

Private ancillary fund holders need to be sure that their grants are only made to organisations that have what is known as "Item 1 DGR status" and are eligible to receive money from private ancillary trusts. There are also rules about how much you distribute.

One of the most popular causes is medical and health research, which has been hit hard by government funding cuts.

Lovett says a new trend is for charitable foundations to provide seed grants or no-interest loans to set up a community social enterprise that will become self-funding, such as Women's Property Initiatives, which provides low-cost housing for women and children.

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Susan has been a finance journalist for more than 30 years, beginning at the Australian Financial Review before moving to the Sydney Morning Herald. She edited a superannuation magazine, Superfunds, for the Association of Superannuation Funds of Australia, and writes regularly on superannuation and managed funds. She's also author of the best-selling book Women and Money.
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