The conventional definition of philanthropy today refers to private initiatives, done for public good, that focus on improving the quality of life of people and societies which are unable to achieve this themselves.
This combines the social science element with human intervention.
While elements of philanthropy seem to overlap with charity, not all charity is philanthropy, or vice versa.
The main difference is that charity tends to be about shorter term, more focused efforts to relieve pain or suffering of whatever sort.
Philanthropy, by contrast, attempts to solve problems at their root. You can think of it as giving someone a house to live in (charity) compared with teaching them how to build it and maintain it (philanthropy).
Commonly connected to giving and wealth protection are ‘Trusts’.
These are a type of special bank account or investment account, into which a person puts some of their assets, such as money, property or investments.
The trust is managed by people the first person has picked, who are called trustees. They agree to manage these assets on behalf of the original person, who officially is no longer the owner of the assets.
Eventually the trustees arrange to pass on some or all of the trust’s assets to other people, often family members. The people who will benefit from the trust’s assets are called beneficiaries.
Trusts help with inheritance tax because the original owner of the assets is no longer the legal owner of them when he puts them into a trust. So the government cannot include them when it is working out how much inheritance tax should be paid.
(However, this does not apply in every jurisdiction.)
Jack has made USD1 million, and owns his family’s USD5 million house. He is getting old though, and wants to pass his money to his three children.
So he sets up a trust, appoints some people to manage it, and puts into the trust USD500,000, plus the ownership of the house.
Jack names his two children, Mum and Uncle Henry, as the beneficiaries of the trust, but says they can only start getting money from it five years after he dies, and can only take out USD20,000 a year maximum.
Because Jack does this, only USD500,000 of his assets will face inheritance tax after he dies.