Let’s talk about philanthropy
Finding greater purpose in the service of others
Are you considering ways to leave a legacy beyond your family, and do you see philanthropy – i.e. more strategic charitable giving – as a meaningful way to do so? Or are you younger and in a position to share your financial good fortune or inherited wealth in a way that helps you find greater purpose in life?
Regardless of your particular circumstances, the starting point for your philanthropy is a discussion with us about your values and the legacy you want to leave or impact you wish to make.
As investment advisors, we believe the discussion about your philanthropic plans is highly personal and should cover a broad range of topics at a deeper level: beyond the practical, this can include identifying the issues, priorities and beliefs that are important to you. It may also involve determining what constitutes positive impact or success and how this can be achieved through your philanthropic endeavors.
Philanthropy in the third act
Thoughtful, reflective and philosophical – these are qualities associated with many older adults and represent values that form the real basis of philanthropy. Having worked exceptionally hard, accumulated considerable wealth and established a comfortable way of life for your family and the next generation, you may be ready to shift your thinking from “what you have” to “who you are”. Strategic charitable giving may be a compelling way to bring this to life and make a meaningful difference to other people or causes.
Philanthropy in the second or first act
For younger philanthropists, including those from Generation X (born between 1965-1980) and Millennials (born 1981-1995), we recognize you may still be in your prime working years but have accumulated considerable wealth through exceptional success in business, the arts or sporting activities, or you’re involved in your family’s philanthropic ventures. We also recognize your propensity for involvement in good causes and ongoing charity.
How can we help?
Our role as your trusted advisory team is to provide guidance and our comprehensive experience – and put a structure in place that allows you and your family to realize your philanthropic hopes and dreams. This can be achieved as part of your larger wealth or financial plan in a tax-efficient manner.
Here are some of the key ways to structure your philanthropic efforts:
Donor Advised Fund (DAF)
A DAF is a fund that you set up with a registered charity that they administer for you. You can put your family name or other name to this fund. The fund is an account created through an initial donation of cash or securities by an individual or family.
You receive a tax receipt for your initial donation and subsequent donations to your DAF. Donations are invested and you make recommendations to your DAF administrator indicating which charities you’d like to receive grants from your fund.
Family members can make up the group of donors that set up and control a private foundation. It is a legal structure that usually takes the form of a corporation or trust. As a registered charity, a private foundation is exempt from paying income tax, but it is required to disburse a certain minimum amount of its assets for charitable purposes. Donations made to the private foundation are eligible for charitable tax receipts to the donor.
Life insurance policy
Using life insurance has the potential to turn your donation into an even larger donation. Options include:
- Donating an existing policy on your life to a charity
- Designating the charity as the beneficiary of a policy that you own
- Taking out a new policy and donating to charity or keeping it and designating the charity as beneficiary
Usually, the recipient charity will want you to continue to pay the premiums on the policy and you would get a charitable tax receipt for the premiums paid. Review the tax benefits with your tax advisor.
Endowments may be an ideal gift to keep donors’ visions alive long after they have passed away and pay lasting tribute to their passions or beliefs. These provide ongoing support to charities in perpetuity. The capital remains untouched, while the income generated is used to finance ongoing programs and services. Naming privileges often recognize the donor or family associated with the endowment.
These are charitable gifts left in your will and through beneficiary designations, to named charities, that go into effect upon your death. Your estate receives a charitable tax receipt, and there may be some flexibility in when the associated tax credit can be applied to reduce income tax owing by you or your estate.
Securities, including mutual funds
Gifts of securities listed on a prescribed public exchange, as well as bonds, mutual fund units and shares, can be a strategic way to give. That’s because capital gains tax does not apply to any accrued gains on the securities you donate, and you get a charitable tax receipt equal to the fair market value on the day ownership is transferred (typically the asset’s closing price).
Let’s start a conversation about philanthropy.
Contact us for an education article on charitable giving; or to discuss your queries and kickstart your plans.