Giving it Away

1. Giving it Away Linda Caisley, CFP CIFPs Vancouver Conference

2. Topics • Triggers • What is a Gift? • Giving Options & Types of Gifts • Receipts & How They’re Used • Recognition and Stewardship

3. Philanthropic Triggers

4. Philanthropic Triggers • Age • Values/beliefs • Financial situation • Being asked to give • Being told to give

5. Age • Several points in the lifecycle when a person might give money (usually big events) • Death or sickness of a loved one • Marriages • Estate planning • Pre-mortem planning for self

6. Research by Russ Alan Prince and Karen Maru File in the Seven Faces of Philanthropy identifies seven distinct groups of values or beliefs based donor motivations: Communitarians Devout Investor Socialite Repayer Altruist dynast Values/Beliefs

7. Communitarians • Give to support their community • Believe that it makes sense to have a strong community, supported by business, charity and government • Follow advice of community leaders and professional advisors • No particular sector of interest, other than charities that make the community better in some way • Give regularly, and in estates

8. Devout • Believe that it is God’s will for people to support others • Usually members of a church or religious group • Generally give primarily to religious groups or charities • Follow advice of religious leaders • Give regularly, but not necessarily big donations

9. Investor • Affluent, and want to give • Invest in philanthropy in the same way they invest their own money • Want to see the charity’s financials, know the senior management • Take advice from professional advisors, friends • Support a wide range of charities, often umbrella organizations • Give strategically, often larger gifts

10. Socialite • Enjoy having a good time while they are giving money away • Have strong social networks • Want their philanthropy to further these networks (to look good in front of their friends) • Use these networks for quid pro quo donations • Take advice from social networks • Support the arts, education, religious groups • Give regular gifts, usually relatively small amounts

11. Repayer • Doing good in return for good done to them • Give from loyalty or obligation • Usually support medical or educational charities • Seldom rely on advisors • Wide range of gifts, regularity depends on nature of service used

12. Altruist • See themselves as selfless givers; giving is a moral obligation • Often want to remain anonymous • Usually focus on social causes • Rarely use advisors

13. Dynast • Have been taught to give as a family tradition • Usually have inherited wealth, but not always • Different generations support different interests • Most likely sector to use advisors • Regular givers, like to be involved in researching causes

15. Donor’s Personal Financial Situation • Donors make smaller gifts any time • Larger gifts will only be made if the donor: • Knows they have enough money • Feels they have enough money

16. Being Asked or Told to Give • Some people will give of their own accord, others need to be prompted to do so • Donors will usually make a donation if asked • Sometimes advisors tell their clients to make a donation as part of their tax planning • Sometimes advisors discuss giving as part of an overall tax plan

17. Gifts – What Are They?

18. What is a gift? • A gift must: • be given freely and voluntarily • be made with “charitable intent” • be of property, not services • not permit the donor to control the property once it has been given

19. Charitable Intent • Proves the donor intended the donation to be a gift worthy of a tax receipt • New regulations intended to prevent fraud by charities and donors

20. Proving Charitable Intent • Must be proved in situations where there is some kind of benefit back to the donor, by either • Demonstrating to the Minister that you intended the donation to be a gift • Showing that the benefit back to the donor was not more than 80% of the gifts FMV

21. Giving Options

22. Options • What is a gift? • Source of Donation Money • Ways to make gifts • Types of Gifts

23. Source of Donation Money • Cash based gifts • Asset based gifts

24. Cash Based Gifts • Made from “left-over” cash • Generally under $1,000 • Gifts generally come from the donor’s yearly “charitable budget” • Usually only made by handing over cash or writing a cheque

25. Asset Based Gifts • Gifts made by transferring all or part of the value of an asset • Usually require assistance and consultation with family and advisors • Made irregularly, usually in estate planning, when they receive a windfall, or special opportunities (naming a chair)

26. Ways to Make Gifts • Directly to the charity • Through an umbrella charity • Through one’s own private foundation

27. Giving Directly to Charity • Simplest form of giving • Need to be clear about what you’re expecting back in recognition for the gift • Generally lose control of the money once the gift has been made

28. Types of Charities • Charitable Organizations • Private Foundations • Public Foundations

29. Charitable Organizations • Use most of their resources to carry out programs or services (“doers”) • 73,791 charitable organizations in Canada • Hospitals, schools, churches, animal shelters, food banks, etc.

30. Private Foundations • Created by a group of related individuals • The foundation issues “grants” each year to other charities • Can support multiple sectors or just one organization • Good way to have philanthropy last beyond death, or involve family • Can be created during lifetime, funded through estate

31. Public Foundations • Created by a group of unrelated community members interested in a specific cause • The foundation issues “grants” each year to other charities to support that cause • Can support several organizations within one cause, or just one • Affiliated foundations: support only one specific charitable organization • Hospital foundations, school foundations, etc.

32. Giving Through An Umbrella Charity • Umbrella charities act as a kind of charitable broker: • Community foundations • United Ways • Good for donors who don’t have a particular cause in mind • Need to understand whether you lose control of the gift once it’s gone

33. Giving to a Private Foundation • Offers the donor the most control over the investment, timing and use of the donation • Allows the donor to give one large donation to the foundation and then space out the grants from the foundation

34. Types of Gifts • Securities • Life insurance • Charitable remainder trusts • Donor advised funds • Private Foundations

35. Securities • Can: • transfer public securities directly to a charity or • donate sales proceeds from either private or public securities • Donor will get a tax receipt for amount donated, and must consider gains or losses in own personal tax situation • Transfers have better tax results than donations of sales proceeds

36. Sale of Securities • If a donor sells public or private securities and transfers the proceeds to any charity, they must incorporate the gains or losses in their personal taxes at the usual rates

37. Transfers of Securities • Transfers of public securities to: • a public foundation or a charitable organization allow the donor a special inclusion rate – currently only 50%, most recent budget indicates 0% • a private foundation have no special inclusion rate • Transfers of private securities to any charity have no special inclusion rate

38. Receipting Securities • Public securities transferred to a charitable organization or a public foundation are receipted when received by the charity’s broker, using closing values for the day they are received • Receipt value will not be the value when sale order given

39. Things to Clarify • If transferring private securities, will any restrictions be placed on their sale by the donor? • Will the charity accept these restrictions? • What are the personal tax implications to the donor?

40. Life Insurance • Types of gifts: • Name a charity as beneficiary • Name a charity as irrevocable beneficiary • Transfer ownership to a charity • IT-244R3 Gifts by Individuals of Life Insurance Policies as Charitable Donations

41. Policy Values • A life insurance policy will be worth either: • NET cash surrender value at time of transfer (CSV – any policy loans), or • Death benefits at the time the charity receives the death benefits

42. Life Insurance - Receipts • Receipts are given when the charity receives the benefit • On transfer of ownership, where there is CSV • Receipt of death benefits, where no CSV policies and no ownership transfers • On payment of premiums

43. Things to Clarify • Who’s going to own the policy? • Who’s going to pay the premiums? • Does the donor want to be able to continue to access any CSV in the policy? • Consider creating a legal agreement for multiple beneficiaries or special donor terms

44. Charitable Remainder Trust • Putting money into a trust • Donor or donor’s family can benefit from income during donor’s lifetime (“income beneficiaries”) • No dipping into capital • Charity gets remainder when income beneficiaries have died

45. Receipts for CRTs • Receipt is given by the charity at the time the CRT is established • Receipt value is for the net present value of the benefit to be received by the charity, at the end of the income beneficiaries’ calculated lives

46. Things to Clarify • Can be challenging to establish net present value of an asset with a subjective value • Private company shares • Art collection • Can be challenging to determine lifespan of income beneficiaries • If donor dies 2 weeks after CRT is established, the value of the receipt doesn’t change

47. Donor Advised Funds • A fund at a charitable organization or a public foundation • Donor makes a gift to establish the fund • Income from the fund spent each year as donor “recommends” • A “deed of gift” will be created to set out the terms of the fund

48. DAF Challenges • Donor loses control over assets – they become the charity’s assets, not the donor’s • May not be able to retain assets as they are • Cannot dictate ongoing investment options • Can’t control costs (administration or investment)

49. DAF Challenges, cont’d • Donor can only make recommendations (not directions) about how income is to be spent • Portfolio manager loses assets out of their book • May be a minimum gift amount ($10,000)

50. DAF Benefits • Donor doesn’t have to worry about administration of the fund • Fund will carry on after the donor’s death