Give It Away, Give It Away, Give It Away Now

The title is an ode to the Californian philosopher: Anthony Kiedis

Since Warren and Willy's "Giving Pledge" roadshow hit China last month and the HK Chief Executive's annual Policy Address which included a Community Care Fund, there's been a lot of reverberation about charity and philanthropy going on. I'd just like to put in a word or 2, because I, and my colleagues in the trust industry, are often the facilitators of charitable and philanthropist giving.

Trusts are the often the structure chosen to hold, manage and/or dispense the assets, typically money and property, for the charity/philanthropist/NPOs. Why? Because, a trust is great at legally separating the patron/donor from the assets. The trustee can then independently (with help from various committees/boards) manage and carry out the intended purpose with a greater degree of skill and professionalism then the giver could. Trusts can also go on for perpetuity if needed as most jurisdictions waive the rules against perpetuity for charitable/philantropic trusts (CPTs) for the greater good of society. Many times CPTs are named or called Foundations (which have nothing to do with the civil law entity) but is technically just another a trust. Some CPTs are quite small, private, unregistered and many details of the donors are kept to a minimum. Others are registered charities and can have a team of dedicated staff running it.

Although the principles are the same, CPTs can be quiet different than your typical private family trust. Firstly, there is tax. Unlike most private trusts, most CPTs are set up as tax-transparent. CPTs that seek/accept public donations are usually required to be registered, file tax returns - often to retain a tax-exempt status and issue tax receipts donors like so much, and sometimes subject to independent audit. Compliance is a big issue and if you're big, like a Red Cross or Community Chest then you can image the volume of record keeping as you have millions of dollars or assets, hundreds of thousands of donors and beneficiaries. CPTs that are "public" need to carefully operate so as to carrying out the purposes intended. Many eyes are upon you. For those trust companies that have never dealt with CPTs or large ones, my word of advice is don't. It takes a special skill set that normal trust officers and administrators do not have. CPTs are no place for the inexperienced. For many, CPTs are a losing proposition because it can consume time and resources like nothing like else you have ever encountered.

CPTs have been around for ages in Asia, just not many of them. There are myriad of articles floating around about why Asians are "less giving" then their Western counterparts and most them have some valid points. Mass wealth in Asia is a relatively new phenomenon. Much of these past few generations has been about surviving, making money and hoarding money, not giving it away. You never quite know when enough is enough for you could lose much of it tomorrow. That is the environment that the nouveau rich in Asia have been growing up in. Worrying about losing one's wealth borders on paranoia.

Many jurisdictions require registered charities to make their financials public. Take a look and you will see that Asians are not adverse to giving as many NPOs/CPTs have accumulated quite significant funds, so much so, you need to start wondering whether they are "worthy" of receiving more of your charitable dollar. Here's a recent tax case where a HK charitable body (a church), took property it owned and made a BILLION dollars and decided it should not have to pay any tax [CHURCH BODY OF THE HONG KONG SHENG KUNG HUI v COMMISSIONER OF INLAND REVENUE [2010] 2 HKC 475]: http://www.hk-lawyer.com/innerpages/37/2010/6/Taxation%20and%20Revenue/37
Religion and tax aside, I don't think this charity needs or deserves any of my money. Of course, there are those that use the guise of CPTs and NPOs for less than admirable purposes, further dampening the giving spirit.

I would say about 30% of the private trusts/wills have some charitable intent and not just because they need a "default beneficiary". However, the amounts are typically small, say a few percentage of the trust fund are earmarked for charity. The primary concern that most settlors have is the financial well-being of their family. And in Asia, often the family extends to siblings, uncles, aunts, nephews and nieces to cousins. I estimate some two-thirds of letter of wishes/trusts/wills leave something for remoter relations which I find rarer for Western clients.

But as the living get richer, their desire to give back grows stronger. Virtually every HNWI or UHNWI I have dealt with has made some contribution of 1 kind or another. The desire is there. There is no typical philanthropist is Asia. I have seen tens of millions donated anonymously, I have seen some go to great lengths for recognition (named building/wing, etc.). I have seen some that just do it with no strings attached, while others are dead-set on pulling the strings. I have those that write the cheque and go away. I have dealt with those that roll up their sleeves and help. If there is anything about Asian donors, it is that they are often quite specific about who/what causethey want to help - it may be some specific school, town, or heath issue,etc. Asians are the least likely to give to a "general" fund. My only advice is be prepared go in with an open mind spend the time to listen and understand what the donor wants.

Short and simple but covers a lot of issues: http://www.stepjournal.org/archive/2010/philanthropy_advisor_june/international_giving.aspx