Philanthropic wealth: donor-advised funds, foundations and charitable trusts, and how giving passes to the next generation
Families give for reasons, and the reasons are the first thing lost when the donor is gone. The vehicles by country, what each controls and costs, and how the giving, and its why, survive a change of hands.
General information, not advice.
Key facts
Cerulli Associates expects about US$18 trillion of the US$124 trillion US wealth transfer through 2048 to go to charity, most of it as bequests and through donor-advised funds and foundations.
A donor-advised fund gives the tax deduction now and lets the family recommend grants over years, with no board, filing or minimum payout; a private foundation gives control and a name, with a board, filings, public disclosure and, in the United States, a 5% annual distribution requirement and a 1.39% excise tax on investment income.
The National Center for Family Philanthropy's Trends studies find that the family foundations whose next generation stays engaged are the ones that gave them real grant-making roles while the founder was alive, not the ones with the largest endowments.
Why do families give, and what dies with the donor?
People give for a cause they met, a debt they feel, a place that made them, a person they lost. The vehicle holds the money and the paperwork; it never holds the reason. When the donor dies, the foundation keeps granting to the causes on the list, and within a generation the list is all that is left: the trustees fund what the deed says and cannot say why. The next generation inherits an obligation without an argument for it, which is how family giving fades, and why the foundation sector is full of trusts named after people nobody on the board ever met.
Which vehicle does what?
Vehicle | Where | Control | Cost and effort | Best for |
|---|---|---|---|---|
Donor-advised fund | US (Fidelity Charitable, Schwab, Vanguard, community foundations; about US$250 billion in assets); UK (CAF, NPT UK, Prism); Canada (community foundations, Canada Gives, bank-sponsored funds); Australia (sub-funds of public ancillary funds such as APS or Equity Trustees); Singapore (Community Foundation of Singapore) | Recommend grants; sponsor decides formally and almost always agrees | Low: 0.5% to 1% a year, no board or filing | Starting; families under a few million in giving; simplicity and anonymity |
Private foundation | US; Australia (private ancillary fund, minimum 5% distribution); UK (charitable trust or CIO, Charity Commission); Canada (private foundation, 5% disbursement quota on assets above C$1 million, 3.5% below); Germany (Stiftung); Israel (public benefit company or amuta); Singapore (charity registered with the Commissioner) | Full: board, grants, investments, staff | High: legal set-up, annual audit or filing, public disclosure, staff at scale | Control, a lasting name, a place for the next generation to learn |
Charitable remainder or lead trust | United States | Income to family then charity (remainder), or the reverse (lead) | Legal set-up; ongoing administration; annual returns | Appreciated assets sold without capital gains; estate-tax planning with giving |
Charitable bequest | Everywhere | One gift, at death | A clause in the will | The simplest legacy gift; in the UK it can cut the inheritance-tax rate to 36%; in the US it is deductible from the taxable estate; in Canada it is claimable against the final return |
Giving circle or family fund | Everywhere, informally | Shared decisions | Minimal | Teaching giving to children and grandchildren |
How is giving taxed by country?
Country | The rule that matters |
|---|---|
United States | Itemised deduction against income: cash to a public charity or DAF up to 60% of adjusted gross income, appreciated securities up to 30% with no capital gains on the gift; to a private foundation 30% and 20% respectively; five-year carry-forward; the 2025 Act adds a deduction for non-itemisers from 2026 and a 0.5% floor for itemisers; bequests are deductible from the taxable estate without limit. |
United Kingdom | Gift Aid adds 25% to a cash gift and higher-rate donors reclaim the difference on their return; gifts of listed shares and land are deductible from income and free of capital gains tax; bequests are exempt from inheritance tax, and leaving 10% of the net estate to charity reduces the rate on the rest to 36%. |
Australia | Gifts of A$2 or more to deductible-gift recipients are deductible without a percentage cap (five-year spread available); gifts of property over A$5,000 deductible at market value; private ancillary funds must distribute 5% of assets a year and public ancillary funds 4%; bequests are not deductible but there is no tax on them; the Cultural Gifts Program gives a deduction for donated art at market value. |
Canada | Federal donation tax credit of 15% on the first C$200 and 29% (33% for top-rate taxpayers) above, plus the provincial credit, worth about 40% to 50% combined; gifts of listed securities carry no capital gains; estate donations can be claimed on the final return or the year before, up to 100% of income; gifts of certified cultural property are exempt from capital gains. |
Israel | A tax credit of 35% of gifts to institutions recognised under section 46, for gifts above NIS 200, up to 30% of taxable income or about NIS 10 million a year, whichever is lower. |
Singapore | A 250% tax deduction for gifts to Institutions of a Public Character, extended to the end of 2026; the Philanthropy Tax Incentive Scheme for family offices allows 100% deduction on overseas donations through qualifying local intermediaries, capped at 40% of income. |
Germany, France, Spain | Germany: deductible up to 20% of income, with a €1 million allowance for endowing a foundation spread over ten years; France: a 66% income-tax credit on gifts up to 20% of income (75% for gifts to organisations helping people in need, up to €1,000), and a 75% wealth-tax credit up to €50,000; Spain: an 80% credit on the first €250 and 40% above (45% for recurring gifts), up to 10% of the tax base. |
How does giving pass to the next generation?
Not by inheritance. Children who are handed a foundation at fifty treat it as a chore; children who were given a grant budget at fifteen treat it as theirs. The practices that work are small and early: a junior board with a real budget (many families use one to five percent of annual grants), a family giving circle where each member proposes and defends a cause, a "learning grant" the next generation controls and reports on, site visits that turn a line on a list into a place they have been, and a seat with a vote by twenty-five. The research on family foundations says the same thing in the language of surveys: engagement follows decisions, not assets, and the foundations that lose their second generation are the ones where the founder kept every decision until the end. DAF or foundation compares the two on exactly this point.
Impact investing inside the family
Many families now put part of the portfolio to work for the cause as well as the return, through the foundation's endowment (US foundations may count programme-related investments toward the 5%), the family office, or a dedicated pool. It is the easiest way to involve a generation that trusts markets more than charities, and the hardest to hold to account; the family constitution should say what counts as impact, who measures it, and what return the family will accept for it.
Spend down or endow?
A perpetual foundation granting 5% of a portfolio returning 7% grows forever and gives a little each year; a spend-down foundation gives everything within a set period, often twenty or twenty-five years after the founder's death, and is the growing choice among founders who do not want a board of strangers running their name in 2126. The decision is the donor's, it belongs in the deed, and the reasoning belongs somewhere the trustees can hear it.
The donor's voice
A mission statement is a paragraph. A letter to future trustees is a page. Both are better than nothing and both are read once. The thing the next trustees will actually want, forty years on, is the donor explaining why this cause and not that one, what a good grant looks like, what they would never fund, and what they would say to a grandchild who wants to change direction. That can be recorded in the donor's own words while the donor is alive, and kept beside the deed.
Where to start
Write the reason down before choosing the vehicle.
Start with a donor-advised fund unless you need control or a name.
Give the next generation a budget this year.
Put a bequest clause in the will and check the tax rule in your country.
Decide perpetual or spend-down, and say why.
Record the why.
Frequently asked
What is a donor-advised fund?+
A giving account at a sponsoring charity: you donate, take the deduction, and recommend grants over time. Low cost, no board.
Donor-advised fund or private foundation?+
A fund for simplicity and most families; a foundation for control, a lasting name and a training ground for the next generation, at the price of filings and disclosure.
Can a charitable bequest reduce inheritance tax?+
In the UK, leaving at least 10% of the net estate to charity reduces the rate on the rest from 40% to 36%; in the US bequests are deductible from the taxable estate; in Canada the credit can offset up to 100% of income on the final return.
How do I get my children involved in giving?+
Give them real decisions early: a budget, a seat, a site visit. Engagement follows decisions, not assets.
Should a foundation last forever?+
Only if the donor wants it to. Spend-down foundations that give everything within a generation are increasingly chosen by founders who want the giving done by people who knew them.
Record the part the documents cannot hold
Twenty-five stories in your own words, in your own voice, kept for the people you name and locked when the time you choose arrives. Free to start.
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