COVID-19 - Updates, Webinars and Resources

Do you need help with Probate?

Our expert legal team is ready to take your call

Mitchell is the Managing Principal of Sharrock Pitman Legal. He is an Accredited Specialist in Commercial Law (accredited by the Law Institute of Victoria). He also deals with areas of Employment Law, Wills & Estate Planning and Probate and can answer all your questions related to probate.

For further information, contact Mitchell on his direct line:


CALL: (03) 8561 3318

A charity giving fund, also known as an ancillary fund, is a vehicle for public and private philanthropy. It is a type of charitable trust designed to provide an investment structure for philanthropic giving purposes. Simple and quick to set up, it offers tax deductions to donors and tax exemptions for income earned by the fund.

In this article we answer the following questions:

  • What is an ancillary fund?
  • What is the difference between a public and a private ancillary fund?
  • Why would you establish an ancillary fund? and
  • What are the main features of an ancillary fund?

What is an ancillary fund?

Ancillary funds are philanthropic ‘giving’ funds that provide a link between people who want to give ('donors') and organisations (other than ancillary funds) that can receive tax deductible donations as deductible gift recipients (‘DGRs’).

An ancillary fund does not undertake charitable work itself, but can be used as a collection point or funnel to pool donations to then be distributed to other DGR charities as decided by the trustees.

An ancillary fund is itself registered as a DGR and so donors can receive a tax deduction for donations made to the fund. Ancillary funds will usually be registered with the Australian Charities and Not-for-profits Commission (‘ACNC’) as a charity so the fund can be endorsed as income tax exempt with the Australian Taxation Office (‘ATO’).

There are two types of ancillary funds:

  • private ancillary funds (‘PAF’), and
  • public ancillary funds (‘PuAF’).

What is the difference between a public and a private ancillary fund?

In a basic sense, a PAF is used by family groups to undertake private philanthropy by pooling resources and distributing donations to chosen DGRs. Donors don’t necessarily all need to be from the same family, but usually share some form of common interest or close relationship. PAFs cannot solicit donations from the general public.

In contrast, a PuAF is used for fundraising purposes to collect donations from the public.

There are other differences in establishment, administration and the required minimum annual distributions, which we will set out below.

Why would you establish an ancillary fund?

A PAF may be suitable for you if:

  • you wish to establish a charity foundation that will keep on giving after your death;
  • you want a structured way to involve your children or family in giving;
  • you have recently disposed of an asset and wish to obtain a tax deduction in the year of sale (however, once a gift is made to the trust it cannot be revoked);
  • you wish to devote a considerable amount of time and money to charity and philanthropy into the future;
  • you see yourself in a philanthropic, financial, supportive role rather than wanting to establish an organisation that provides charitable services or activities itself;
  • you want to establish a tax deductible vehicle for investing and accumulating assets for philanthropic and charitable purposes.

In addition, a PuAF may be suitable if you are an organisation that wants to establish a public foundation for more efficient fundraising and to give to DGR entities connected to your organisation or pursuing the same cause.

A PAF isn’t necessary where you’re happy to give to charity on an ad hoc basis in response to requests or needs. There are costs in establishing and maintaining an ancillary fund (e.g. costs of audit or review of financial statements and the lodgment of an income tax return) so whether or not it’s worthwhile establishing a fund usually depends on the amount being invested. We usually recommend PAFs start with around
$500,000-$1 million.

What are the main features of an ancillary fund?

Ancillary funds have the following additional features and requirements:

  • The fund must have an Australian Business Number (‘ABN’) and be established and operated from Australia.
  • The fund must comply with various rules and guidelines, have the required clauses in its trust deed and operate as a ‘not-for-profit’ entity.
  • A PuAF must invite the public to make donations and the public must in fact contribute to the fund.
  • The fund must meet the ‘minimum annual distribution’ requirements. Special distribution rules have been approved by the Federal Government for use during the COVID-19 pandemic.
  • The fund must have its financial statements audited or reviewed each year (an audit is required if revenue and assets are less than $1 million).
  • The fund must have a formal investment strategy.
  • Generally, PuAF cannot borrow money, must maintain investments on an arm’s-length basis, and must not provide assistance to related parties or acquire assets from them (other than by way of gift).
  • A PAF must have a corporate trustee, with at least one director meeting the ATO’s ‘responsible person’ test. This person cannot also be the founder or a major donor to the PAF. For a PuAF, a majority of directors of the corporate trustee must meet the ‘responsible person’ test.

Need more information?

If you’d like to explore the establishment of a PAF or PuAF, please contact the Sharrock Pitman Legal not-for-profit team on 1300 205 506. We would be happy to provide more detailed advice tailored to your circumstances and objectives or to assist with the establishment of a PAF or PuAF.

The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.

Liability limited by a scheme approved under Professional Standards Legislation.

Written by one of our lawyers

,

.

Dan Saunders

For further information contact

Dan Saunders

Dan is a Legal Practitioner at Sharrock Pitman Legal.

He deals with areas of Charities & Not for Profit Law and Commercial Law. For further information, contact Dan on his direct line (03) 8561 3325.

More on

Charities & Not For Profits

However, in this article we will set out the factors that influence how long it will take to obtain a Grant of Probate and to administer an estate in Victoria.

The basics

First things first: what is a Grant of Probate? A Grant of Probate is effectively a document issued by the Supreme Court of Victoria which formally authorises an executor to manage the estate of a deceased person in accordance with their Will. Without Probate, the asset holders (say a bank or share registry) cannot be satisfied as who has the correct authority to receive the deceased's assets and may refuse to pay out.

Sometimes, for smaller estates or if assets are mostly jointly owned with a surviving spouse, asset holders might agree to release payment without requiring a Grant of Probate. This is usually on the basis that the person who receives payment promises to repay (or Indemnify) the asset holder if it turns out they paid to the wrong person.

If there is no Will, then you cannot obtain a Grant of Probate. Instead you obtain Letters of Administration. This is effectively the same, in terms of authorising someone to administer the estate, and would usually be obtained by the person who is the closest next-of-kin to the deceased.

“A Grant of Probate is effectively a document issued by the Supreme Court of Victoria which formally authorises an executor to manage the estate of a deceased person in accordance with their Will.”

Timeframes for Probate in Victoria

In order to obtain a Grant of Probate, the Court needs to be given information about the assets and liabilities of the estate, the deceased person, the witnesses to the Will, the executors and the Will itself. An advertisement of your intention to apply for Probate must also be placed on the Supreme Court website for at least 14 days prior to any application.

Often, making enquires to obtain all the necessary information can take a number of weeks. Also, you will need the Death Certificate for the application for Grant of Probate and possibly for making proper enquires regarding the assets and liabilities. Waiting for the Death Certificate to issue can therefore add a few more weeks to the process. Overall, if you have your application for Grant of Probate lodged within 1 to 2 months from the date of death, you are making timely progress.

The Court itself does not take long to process the application (maybe another 1 to 2 weeks) and this is done 'on the papers' using the electronic Court filing system. This means you do not have to go to a court hearing. There is also a general discretion for the Court to issue a 'Requisition' asking that you provide more information before they process the application and this can delay matters.

“Overall, if you have your application for Grant of Probate lodged within 1 to 2 months from the date of death, you are making timely progress.”

So, here we are a few months after death and you finally have a Grant of Probate. It is important to remember that this is the start of the estate administration and not the end. For a very simple estate, you might only need a further month or so to cash the assets and pay them to the correct beneficiaries. However, it can often be more complex than that. Factors that determine the timeframe to administer the estate include:-

  • Some assets will take time to cash or transfer. For example, if selling a property, final settlement might be 60/90/120 days from the day of sale.
  • There is a 6 month period for challenges to be brought against the estate and executors must wait until this period expires before distributing the estate, if there is any risk that a disgruntled family member might come forward.
  • There might need to be final tax returns for the deceased or for the estate. Failing to wait for the ATO to process these could leave the executor personally liable for a tax bill.
  • You might need to advertise for creditors to come forward and wait for a period of months while this advertising timeframe expires. This protects the executor if they are unsure of all of the deceased's financial dealings and creditors.
  • It might not always be a good time to immediately cash estate assets. For example, the shares just took a nose-dive, do you still sell regardless of available price?

There is a general rule that executors have an 'executor's year' to complete the estate administration. This means that you should be aiming to have the estate finalised and distributed within 12 months from the date of death.

The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.

Liability limited by a scheme approved under Professional Standards Legislation.

Need help with Probate?

Our expert legal team is ready to take your call!

Mitchell is the Managing Principal of Sharrock Pitman Legal. He is an Accredited Specialist in Commercial Law (accredited by the Law Institute of Victoria). He also deals with areas of Employment Law, Wills & Estate Planning and Probate and can answer all your questions related to probate.

For further information, contact Mitchell on his direct line:

DIRECT LINE: 
(03) 8561 3318

Download our FREE legal guide to Probates & Estates in Australia

GET YOUR FREE DOWNLOAD

Enter your details

Thanks for your interest! 

Here's your download:
DOWNLOAD PDF
Oops! Something went wrong while submitting the form.

Could your business do with a “health check”?

Fill in our survey about the legal health of your business and get 30 minutes FREE legal advice!

FILL OUT SURVEY NOW

Could your Not for Profit organisation do with a "health check"?

Fill in our survey about the legal health of your organisation and get 30 minutes FREE legal advice!

FILL OUT SURVEY NOW

About Sharrock Pitman Legal

For fifty years Sharrock Pitman Legal has made a significant and long term contribution to meeting the legal needs of business owners and residents in the City of Monash and greater Melbourne area.