Supporting clients through their philanthropy lifecycle

From identifying a client's values and devising a strong strategy to troubleshooting problems, our role as lawyers is to provide a holistic service.

20 January 2023

This article originally featured in Philanthropy Impact Magazine – Issue 28, Part 2 (January 2023)

Lawyers are often a first port of call for philanthropists. As a private client lawyer specialising in philanthropy and charity law, my clients span the spectrum.

They include high net worth and ultra-high net worth individuals looking to formalise and professionalise their philanthropy, and corporates considering corporate social responsibility programmes.

Most of the clients we see have been engaged with ad hoc charitable giving for several years, and their desire to formalise their philanthropy and seek advice is often triggered by a liquidity event, such as selling a business or receiving an inheritance. However, we often find there are numerous points throughout their journey where we can add value, support and guidance – or if we can’t help in a certain area, we have a good network of contacts and other specialists to call on.

Vision

A comment that often comes up in our initial meetings with clients is that they don’t know where to start. Lawyers can often rush straight to the structuring and tax advice. Whilst these are important elements of philanthropy, in my view the most important stage is devising a clear strategy that reflects an individual’s or a family’s values.

Lawyers can sometimes shy away from conversations about values as it can feel intrusive or a bit ‘touchy feely’. We need to get more comfortable raising this with our clients.

As with a successful business, effective philanthropy is underpinned by a strong strategy, which outlines, amongst other things, where to focus your support, the types of organisations you want to work with, how engaged you want to be, and how your philanthropy should be structured.

Structuring

For those looking to implement their strategy through their own charity, there are a number of vehicles to choose from, and we frequently help clients work out which vehicle is right for them.

The ideal vehicle depends on what the charity is being set up to achieve and how. The greater the risk or funds involved, the stronger the argument for an incorporated structure with separate legal personality and limited liability. Of the incorporated vehicles, companies and CIOs are the most popular. Other considerations include how decisions are to be made, reporting requirements, and the time and costs of set-up.

For international clients who want to benefit organisations in their home countries, having their own charitable foundation allows them to both obtain tax relief on donations to the foundation in the UK, and make grants overseas. Donations made directly overseas would not otherwise benefit from Gift Aid.

Alternatives

A trade-off for the generous tax reliefs enjoyed by charities is that they are subject to regulation by the Charity Commission (the Commission) and this regulation applies to private grant-making charities in the same way as large operational charities. The regulatory and legal framework in England and Wales is one of the more heavily regulated frameworks across the globe. As a result, philanthropic organisations regulated in the UK come with a degree of credibility and trust that is largely unrivalled.

We sometimes come across clients who have charitable foundations who possibly should not. We have seen examples where clients simply don’t understand that the money is no longer theirs to do with as they wish. Clients sometimes fail to appreciate what proper governance and independence means – that all charities, once constituted, must be independent of their founders and must be operated as such.

Regulation also means the preparation and filing of annual accounts and reports, and compliance with a number of policies and procedures required by the Commission. If the client doesn’t have the appetite for complying with this level of regulation, or sufficient funds to outsource some of the compliance work, they really should not have their own foundation, and should perhaps consider a DAF.

Implementation

In a survey commissioned by Burges Salmon earlier this year, 100 UK high-net-worth individuals were asked about their approach to philanthropy and the challenges they have faced. The responses suggest that donors are confusing tax and estate-planning advice with philanthropy advice.

Tax and estate planning plays an important role in philanthropy, but it is only one part of the picture. No one specialist can lend expertise across the full spectrum of philanthropy advice – the range of skills involved is too wide and varied. The key for clients is to find holistic guidance – a single point of contact between them and the advice they need.

Once a vehicle is set up, we prepare policies and procedures on how to run the charity, and coordinate advice from our trusted network of other advisors that can help with the rest of the picture.

Due Diligence

When it comes to choosing organisations to support, ensuring they’re credible, accountable and competent is crucial. Effective due diligence can vary from desk research to site visits, interviews, consultation with other funders or volunteering. But gaining full confidence can be a challenge without expert guidance throughout the process.

In the survey we commissioned earlier this year, doing your due diligence was considered by the majority of respondents to be the best philanthropy advice they had ever received.

Of those surveyed, 70% confirmed that they conducted due diligence research before donating to charities or causes, but 50% of respondents had mixed feelings about how confident they were that their donations were having the desired impact. When asked about barriers to giving, 31% of respondents said they didn’t have confidence in how charities are run. This seems to suggest that the due diligence being done by the respondents is not very effective.

As lawyers, we are not experts in conducting due diligence on charities but we have contacts with a number of experts in this field who help our clients decide which organisations to support. It is worth investing the time and money up front to avoid disappointment later.

Troubleshooting

Lawyers also get involved when things go wrong. We regularly advise clients with foundations on how to deal with incidents, for example where grants have been made to organisations that have become insolvent or to international partners and misapplied by beneficiary organisations.

Providing advice throughout a client’s philanthropic journey has to be one of the more rewarding aspects of being a private client lawyer and, provided you get it right, should result in a loyal, long-term relationship with the client and future generations.

Turning good into great: Insights into effective philanthropy

Our guide "Turning good into great: Insights into effective philanthropy” shares invaluable insights and practical experience on the steps you need to take to ensure your philanthropy is as effective as possible. Find out more on how it can support you on your philanthropic journey here.

Key contact

catherine-de-maid

Catherine de Maid Partner

  • Head of Philanthropy
  • International Tax
  • Succession Planning and Wills

Subscribe to news and insight

Burges Salmon careers

We work hard to make sure Burges Salmon is a great place to work.
Find out more