As part of a global network of over 1,800 community foundations world-wide, The Community Foundation for Ireland has the opportunity to collaborate with other community foundations and to learn from their extensive experience developed over a century. This includes a strong track record in relation to charitable legacies – both as a trusted recipient of bequests as well as working with professional advisers and other stakeholders in promoting legacy giving and providing suitable pathways for engagement.
Giving in Ireland tends to be small-scale and spontaneous and Ireland is also a laggard in relation to legacy giving, especially relative to the international leaders in this space. In 2018 Community Foundation Ireland published a report (Legacies for Good) the theme of which was the enormous potential for philanthropy in Ireland arising from prospective transfers of wealth in the coming decades.
Against a backdrop of a forthcoming National Policy on Philanthropy, Community Foundation Ireland decided to revisit the research to see what has happened in the past 5 years and were very pleased that the Economist Jim O’Leary undertook both reports.
Importantly, the draft National Philanthropy Policy notes that “Giving by way of legacies and bequests in Ireland is modest” and that “as a vehicle for philanthropic giving, the potential to grow bequests is compelling, particularly when considered against a backdrop of significant growth in wealth in Ireland and future intergenerational transfer of wealth.”
So what does the new Community Foundation Ireland research tell us?
Firstly we see that household wealth has increased considerably over the past 5 years. According to the Central Bank, aggregate household net wealth comfortably topped €1 trillion at the end of 2022, representing an increase of almost 50% on its end-2017 level. This means that the amount of wealth available for inter-generational transfer is now much higher than the 2018 research suggested.
Secondly, in terms of the amount of wealth available for inter-generational transfer on an annual basis, our 2018 analysis produced a figure of about €5.7bn, some 1% of the contemporaneous estimate of total transferable household wealth. Applying the same proportion to the corresponding current measure of household wealth suggests that the inter-generational transfer is now running at an annual rate of around €9bn, a €3.3 billion increase.
Thirdly and positively, it appears that there has been strong growth in charitable bequests in recent years, with something more than a doubling taking place between 2015-16 and 2021 or an annual average increase of 15-16%. If that sort of growth has been maintained since 2021 it may be that the aggregate annual legacy income of the not-for-profit sector is now over €140 million. That would be the equivalent of 1.5% of our estimate of the annual inter-generational transfer of wealth, an appreciable increase from the 0.9% arrived at in our 2018 report, but still well behind the leading countries in this regard: the corresponding proportion in the UK for example was 3.6% in 2022. The report finds that with only 30% of the adult population making a will, there is a case for a renewed information campaign to highlight the importance of people drawing up wills and the opportunity that making a will affords to ‘give back’, to donate to a charitable cause, including the fact that such donations are tax-free in the hands of the charity concerned.
The Community Foundation for Ireland Report makes the case for using the tax system to incentivise charitable donations at the point of wealth transfer which was first proposed in the 2018 report.
Specifically, in the case of charitable donations a €-for-€ deduction would be allowed from the amount of the overall inheritance liable to Capital Acquisitions Tax.
In order to focus the incentive on relatively large donations, the basic proposal might be supplemented with a requirement that qualifying donations must be of a certain size.
Finally, The 2018 report noted the absence of official data on charitable bequests. In this connection, we welcome the recent report on charitable bequests by the Charities Regulator and the detailed analysis set out therein and note that the data contained in this report were gathered as a result of the recently introduced requirement that charities publish data on their income from bequests in their annual reports.
We also note that there is some outstanding work to be done in this regard, in particular to ensure that the sizeable minority of charities that have been dilatory in the matter of publishing accounts rectify the situation.
In terms of the objective of Stimulating and Incentivising Philanthropy, the draft National Philanthropy Policy policy includes a recommendation to identify measures to encourage less developed vehicles of philanthropic funding, including legacy giving. We believe that the revisited Legacies for Good Report makes an important contribution in that regard.
Jackie Harrison is Director of Philanthropy with Community Foundation Ireland.
You can access the research by Economist Jim O’Leary Here.