In March 2019, the University of Toronto announced its largest donation to date, a $100-million donation from philanthropists Gerald Schwartz and Heather Reisman. The donation came from The Gerald Schwartz and Heather Reisman Foundation (“the Foundation”), which is reported to hold nearly $300-million of assets.
Not many people have the means to donate such a large amount of money, but all investors can access the tools that Mr. Schwartz and Ms. Reisman have used to accumulate and distribute their Charitable-focused assets. I’ve briefly outlined 3 tools that we use at Nicol Sanchez Wealth to help our clients achieve their Philanthropic goals. Contact us to learn more about how these strategies can work to benefit you and the charitable organizations you support.
Donations of Investments
According to public filings, Mr. Schwartz had donated some shares of ONEX Corporation to the Foundation in late 2008. This is an excellent strategy when you own shares that have increased substantially in value. Check out our case study that outlines the potential benefits of donating appreciated investments vs. donating cash.
A direct donation gives the total proceeds to the charity immediately, which is suitable for “normal sized” donations. For larger amounts, you may wish to spread the gift over several years. For example, your favorite charity may run a donor-drive event every year, and you would like to ensure that you have enough charitable funds to give equal support each year.
A Charitable Foundation is one option for facilitating such a long-term donation strategy. The donor receives a donation tax credit in the year that they give assets to the Foundation. The assets may then remain in the Foundation and may be paid out to eligible charitable organizations over the course of several years (there are a few specific rules e.g. minimum disbursements per year). When combined with a Donation of Investments, you may make the personal donation at a time that is ideal from an investment and tax perspective, but then develop a long-term plan for actually distributing the capital to your preferred charities.
The downside is that a Charitable Foundation may be complicated and costly to manage. The Foundation above for example, is reported
to have 15 Directors/Trustees, and Charitable Foundations also have strict reporting requirements.
The charitable status of a Charitable Foundation may be revoked if it does not file its annual return or is found to be non-compliant with the guidelines and rules.
Donor Advised Funds (“DAF”)
A DAF is a great option for Donors who want the flexibility of a Charitable Foundation but not the cost and administrative burden that comes with it. A DAF is a giving vehicle created within a registered public charity that provides the two key benefits of a Charitable Foundation:
- Receive a tax deduction in the year you make your donation; and
- Have the flexibility to actually distribute to eligible charitable organizations over time (again, subject to certain rules such as annual minimum disbursements).
The regulatory burden however lies with the main charity, which should have the proper systems and staff to ensure that all the rules are followed.
With a DAF, you can provide guidance on how the portfolio should be invested2 as well as the timing and direction of how funds are distributed to eligible charitable organizations.
2 Check with your DAF provider to see what level of flexibility and complexity they are willing to implement in their investment portfolio.