Bringing Clients, Charities and Investment Advisors Together

Winston Churchill once said “we make a living by what we get, but we make a life by what we give.” In today’s socially conscious and closely connected world, Churchill’s old observation has acquired new relevance.

Canadians are wealthier than ever before, and, whether driven by the desire to make a difference, leave a legacy, or help a new generation build for tomorrow, they are giving that wealth back to their communities – in gifts of their time, knowledge, influence and increasingly, in cold hard cash.

This is due in part to recent changes that allow Canadians to receive a tax credit for the donation of securities to charities without having to pay a capital gains tax on their appreciated value. But perhaps the bigger indicator that this trend will continue is demographics and the aging of the baby boomers. Canada’s 4.4 million pensioners already contribute almost 30 per cent of all charitable donations. Their number is expected to almost double by 2026.

Planned giving is usually equated with ‘giving later’ such as bequests, life insurance policy beneficiary designations, charitable remainder trusts, gifts of residual interests, and similar arrangements where the commitment is made now but the funds are not made available to the charity until some future time. However, planned gifts can be outright as well as deferred. A major gift might consist of appreciated publically listed securities in-kind, privately-owned securities, real estate, or retirement funds. As long as the gift is structured and timed to limit any tax on the capital gain and obtain full benefit of the tax credit, it is a planned gift.

Planned giving has already changed how charities solicit donations. Baby boomers are looking to create a legacy or send a strong message to future generations. They want transparency, accountability, and measuring tools on the specific problem their donation is helping to solve, and charities have responded.

More and more investment advisors are addressing their clients’ growing interest in philanthropy by helping them to realize their philanthropic objectives while maximizing tax and other financial benefits. Fortunately, help is at hand. Recent years have witnessed the growth of charitable foundations whose primary job is to connect investors and their advisors with worthy charities through the creation of donor advised funds.

Canadians investing in donor advised funds can realize many of the financial and personal advantages that come with establishing their own charitable foundation, with significantly less cost and complexity. Rarely has there been such a winning combination. It is all about helping donors to be efficient in their giving, maintain an element of control over where they direct their gifts, and minimize their tax burden – without having to worry about the administrative details.