Li Ka-shing

Charitable trusts multiply in Asia

PUBLISHED : Saturday, 20 May, 2006, 12:00am
UPDATED : Saturday, 20 May, 2006, 12:00am


LI KA-SHING, the Kadoories and Jackie Chan are among Hong Kong's most famous names. And they have all set up trusts to help others.

Unlike the more standard type of trust, which benefits a person or persons, a charitable trust can be for specific purposes, which should be recognised by and in accordance with Hong Kong law.

The benefit of registering a trust in this way is that donations received will be tax deductible. It is therefore a useful method for a family or organisation to oversee its charitable activities.

A family office, which is professionally staffed to manage a high net-worth family's investments, can also set up their own foundations, funded by the trust. Such a move is generally prompted by a genuine desire to give something back to society. That certainly appears to be the case with the Bill and Melinda Gates Foundation, the world's largest, which was started with an endowment of US$29.1 billion.

While the broader community gains in medical care, education or environmental programmes, there are also intangible benefits for the family. These can include a consistent focus on specific projects which are passed on from generation to generation.

The principle of the philanthropic trust is well established in Europe and the United States, and now seems to be gaining ground in Asia, said Alan Johnson, Asia managing director of Fortis Intertrust.

A possible explanation is that a high-profile and substantial gift can serve as a wake-up call and inspiration to other wealthy individuals who decide to follow suit.

Some of the best-known philanthropists in Hong Kong today are Li Ka-Shing, who donates to medical, education, cultural and community welfare projects; the Kadoorie family, which helps with health, community development and poverty alleviation projects; and Jackie Chan, who provides sponsorship for scholarships, youth development programmes and aid to victims of natural disasters.

Financial institutions can play a part by helping clients who want to organise their charitable activities in the most efficient way.

Lau Ka-Shi, chairman of the Hong Kong Trustees' Association (HKTA), said that some local banks had hired philanthropy specialists to assist where necessary. Fortis Intertrust has a philanthropy division which advises high net-worth families, based on a similar division already operating in Europe.

There are four staff members, and the company plans to hire more when suitably qualified candidates are found.

Along the way, there are various considerations for the company to take into account.

Firstly, it is important to know what the family is trying to achieve and whether they do or do not want public recognition. They might, for example, have earned a fortune from an environmentally destructive industry, such as logging, and want to be seen doing something which can be portrayed in a more positive light.

Secondly, it is necessary to decide what kind of charity to support. Funds might go to one particular area or to a larger number of deserving causes, possibly via a religious group or through an umbrella organisation such as the Community Chest. In terms of administration, the time period for the trust should also be agreed on.

Mr Johnson explained that the age of the principal donor would have a bearing on these decisions, and the priorities may change. For instance, there is a discernible trend within families to concentrate initially on one-off projects closer to home, while later generations tend to get involved in programmes further afield.

Mr Johnson noted that there were still risks associated with charitable trusts and that good planning was essential.

'If you don't go through the procedures of sitting down with people experienced in philanthropy, it can all disintegrate in the end,' he said.

It can even happen that people lose interest in the various projects and the trustee must then decide what needs to be done. In such cases, the first step is to look at the original intention of the trust, which is why proper guidelines are needed at the onset.

Occasionally, it is necessary to create a new advisory council or to go to court for guidance. In that way, the trustee can prove that all responsibilities have been carried out correctly.

One point to note is that some charities have had to restructure the way they receive money

from trusts to meet the stated terms.

For example, the donor or trustees may want to contribute to a specific project run by an international NGO, rather than to the organisation generally.

This therefore requires a method to track funding and ensure it is only used for the intended purpose.

While more people are setting up charitable trusts, industry professionals still believe it is important to provide better client education through seminars or other events for the public.