‘What counts in life is not the mere fact that we have lived. It is what difference we have made to the lives of others that will determine the significance of the life we lead.’
With these words by the late Nelson Mandela top of mind this month, how can your family ensure a charitable legacy to last over generations?
Studies have shown that by activating the reward centres in our brains, giving to others makes us happier human beings. Acts of kindness make a difference not only to the lives of those less fortunate and their communities, but also to the health and well-being of givers.
Governments around the world, including South Africa, support giving by granting tax breaks on donations to tax exempt charitable organisations.
Many people only give away some of their wealth after they die by way of bequests in their wills to charities of their choice.
Others regard philanthropic giving as vital during their lifetimes. Environmental causes mostly benefit herefrom in terms of research on the topic, with many donors not only donating money but taking a more hands-on approach, by giving their time and effort to the causes they believe in.
It’s crucial to get the whole family on board – everyone, especially the next generation, needs to buy into the agreed legacy by which the family wants to be remembered.
It is important to consider the tax consequences of donating to public benefit organisations (“PBO’s”). It is vital to confirm that they have tax exemptions and comply with Section 18A of the Income Tax Act in South Africa. Donations to such PBO’s will not be subject to donations tax or capital gains tax in the hands of the donor, and will not be subject to estate duty in the estate of the deceased giver. Such donations can be claimed as tax deductions against taxable income by the donor up to certain limits.
The structure to be used to facilitate your family’s charitable giving has to be considered. A charitable trust that meets the requirements to obtain the necessary tax exemptions in the trust deed, or a so-called section 21 company with shareholders and directors, or with no shareholders and only directors for decision making purposes, are the two structures mostly used.
If you would like assistance in facilitating a family discussion around the various aspects of giving and creating lasting legacies, setting up a charitable giving programme for yourself or your family, advice on the different charitable causes available or the tax implications of charitable giving, or to assist in setting up a charitable trust or company, please contact Marteen Michau at marteen@fidelisvox.co.za.
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)