Article on Jurisdictional Considerations for Family Charitable Entities

Tina E. Albright recently published an Article entitled, Jurisdictional Considerations in Structuring a Family Charitable Entity, Trusts & Estates (Nov. 2016). Provided below is a summary of the Article:

Family advisors are often tasked with creating an entity that will be used to carry out a client’s philanthropic purpose. With increasing interest from global families in such vehicles, the advisor needs to consider where to form the charitable entity. The potential options may narrow if the client is seeking to obtain tax relief on a transfer to the charity. In that case, the entity may need to be formed in the jurisdiction of the client’s residence or where the potential charitable tax relief is sourced. In some cases, a charitable entity formed under the laws of a treaty country may be an option.

In considering which jurisdiction best suits a particular client, the advisor should consider a number of key factors. What type of charitable entity is available, for example, non‑stock corporation, trust, foundation or other? Are charitable entities in that jurisdiction tax-exempt? Are there any restrictions or requirements as to who may serve in a governance position? Is the charitable entity subject to jurisdictional regulation? Is regulatory compliance onerous and/or costly? Is the charitable entity required to have audited financials and if so, how often? May the charitable entity make grants to entities and/or for purposes outside of the jurisdiction where the entity was formed? Is the charitable entity required to make distributions at certain intervals, for example, annually? Must any of its distributions be made within the jurisdiction of formation? Are there limitations and/or restrictions on charitable entities regarding the types of investments, custodian and/or banking relationships?

This article provides an overview of the key considerations in forming charitable entities in the United States and the United Kingdom. In future articles, other countries will be addressed.