Tax Expert - Charity Set-up For Bankrupt In-laws

My inlaws are on the verge of personal and business bankruptcy.

They live in the UK, are in their sixties and are not eligible for government benefits (other than maybe a job seekers allowance... but not for the pension).

They have zip assets, so their four kids are going to need to help them out.

Would it be possible to set up a legal charity we could donate to which would then support the in-laws? (ie donations could be tax-deductible so any money isn't being taxed twice).

Would support be able to run to buying a house in the UK (so at least some potential return for us in the distant, distant, distant future)?

Any thoughts or advice?
 
This is a question I field occasionally for clients who want to set up a charity that they can benefit personally from after reading about how some rich people do it.

First of all, the set up costs for such a charity are around $10,000.

Second, you have to get Deductible Gift Recipient status from the tax office. A fund set up for the benefit of Mr and Mrs X will not pass.
http://ato.gov.au/nonprofit/content.asp?doc=/content/66281.htm&page=1#P42_2377

Third, you would have to maintain that status with regular audits and reviews of your paperwork.

Since they are in the UK and bankruptcy is a legal matter, you would need to discuss these things with a lawyer who deals with these matters over there. But from my dealings with UK residents, I would be surprised if there were no benefits they could receive.
 
(ie donations could be tax-deductible so any money isn't being taxed twice).

Why would it be taxed twice? You pay tax here on what you earn and then you give it to your in laws. No tax should be payable by your inlaws. (unless there is a gift tax over in the UK)

If you mean that you want to give the inlaws money and no tax is payable, either here or there, then that is a different matter.

Cheers
 
Why would it be taxed twice? You pay tax here on what you earn and then you give it to your in laws. No tax should be payable by your inlaws. (unless there is a gift tax over in the UK)

If you mean that you want to give the inlaws money and no tax is payable, either here or there, then that is a different matter.

Cheers

I wonder if they mean to be able to claim the "gift" as a tax-deduction.
 
thanks

Ideally, we would not pay tax either side.

$10K in charity set up fees would be worth it if we could do it.

I would worry they would have to pay tax on gifts from us as it might be counted as "income" for them.

They don't get a UK pension because they never paid National Insurance as they were employers not employees. They might get jobseekers allowance but it's fifty pounds a week so won't go far.

Realise the need for professional advice if we go down this track.

Thanks for your thoughts/responses.
 
I worked for a Charity that took years for it to be approved by our Government. But it was a real charity - it helped those for whom we had no relationship other than a desire to help. Sorry, but I hardly think helping your in laws warrants Australian tax payers to forgo some of the taxes that you would normally pay if you didnt have deductions to "charities" - ie your family.

And I dont care if rich people do it, I think the whole concept sucks to be honest.
 
Consider speaking with a financial adviser about putting money through a super fund. They're generally protected against bankruptcy and have lots of tax benefits.
 
I am involved with a legitimate not for profit organisation who have taken years and years to get the tax deduction status, I wouldnt think you would have a hope in hell of going down that road
 
And I dont care if rich people do it, I think the whole concept sucks to be honest.

Just to clarify, I do agree with your sentiments. When I do have people ask about setting up a charity, I point out what I said in point 2 - a charity set up to benefit them personally is a sham and would not obtain DGR status. I don't know what they do in the US, but over here its a no go.

If people attempt to game the charity system by setting up charities to benefit particular people instead of for a benevolent cause, I imagine they would end up with legal problems. And other charities might end up further regulated.
 
no go

Looks like the idea is a no go.

Points noted re the moral arguments too, although money wouldn't be for ourselves it would not be for 'the community'.
 
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