How to build your family’s philanthropic legacy
For many Canadians, donating to charitable organizations isn’t just a way to give back to the community and receive some tax benefits; it’s also an opportunity to develop a giving legacy that can be passed down to future generations.
With the massive transfer of wealth from older to younger generations—an estimated C$1 trillion to be passed from Baby Boomers to Gen X and Millennials in Canada by 2026—many parents are looking at ways to engage adult children in their philanthropic pursuits.
By bringing children into the giving discussion, families could help to close what CanadaHelps calls the “giving gap,” which is a steady decline in the percentage of Canadians donating to charities, alongside an increased reliance on a smaller group of aging donors.
CanadaHelps says most Canadians understand the critical role registered charities play in keeping the country strong. Charitable giving is also considered increasingly important given the number of social, economic, geopolitical and environmental issues our society faces.
How to involve children in your charitable plans
For many Canadians, donating assets isn’t the issue; it’s how to get started. While it may be easy to write a cheque or hit the ‘donate’ button on a charity’s website, figuring out which causes to support (among a growing list), how much to give and over what timeframe can be daunting.
Many parents are also unsure of how to involve adult children in their giving strategies, especially when family members often have different ideas about which causes to support.
For instance, a parent might wish to support a cancer research organization or local library, while their children might want to earmark funds for a youth shelter or animal welfare organization.
A wealth management professional with charitable giving expertise can help parents devise a giving plan that aligns with their values while also engaging other family members.
Often advisors will recommend families have multiple discussions over weeks, months or even years to determine the best organization(s) to support now and over the long term.
Some questions families might consider asking themselves include:
-What kind of legacy do you want to leave?
-What issues are of concern to you now and in the future?
-What are your core giving objectives?
-What impact do you hope to achieve?
Families should also consider creating a list of charitable organizations that interest them. Organizations such as CanadaHelps and Charity Intelligence Canada can help narrow down and bring clarity to the
Having meaningful discussions about where to give will help families figure out the next step, which is how much to donate, and when, in a way that’s tax efficient and fits their holistic wealth management plan and objectives
Finding the right donation structure
There are a few different ways to donate to causes your family deems important. For many families, the decision comes down to how involved they want to be in their philanthropic activities.
Writing cheques to charities and receiving tax donation slips may be enough for some. However, many high-net-worth individuals and families use more formalized structures to donate their wealth.
The two main types are private foundations, which are charities controlled and run by a single donor or family; or donor-advised funds, created by public charities that manage donations on behalf of individuals, families or organizations. Each structure can be fulfilling and tax-effective, but there are differences depending on the donor’s philanthropic goals.
Private foundations are a great structure for high-net-worth and ultra-high-net-worth families looking to directly oversee their charitable giving, including the governance and administration. However, since they are corporations or trusts registered with the Canada Revenue Agency (CRA) as a registered charity, private foundations can be expensive to set up and maintain. There is also less anonymity with a private foundation given its disclosure requirements, which then become public information.
A donor advised fund is an increasingly popular option for philanthropic families looking to have the administration and charitable assets professionally managed by a foundation. With this structure, the donors recommend to the foundation which charities should receive grants and when. Donors also receive an immediate tax deduction for their contribution, even if the funds are distributed later.
Donors can also remain anonymous to the registered charities receiving their funds and to the public at large while anonymity is somewhat of a trade off for private family foundations Overall, it’s a relatively low-cost and seamless solution for families wishing to see their wealth in action.
Ready to get started?
Philanthropy can feel overwhelming, complicated and ambitious. However, by working with a wealth management professional with charitable giving expertise, creating a philanthropic legacy for your family can be relatively simple and satisfying.
Many financial institutions, such as Gluskin Sheff, have in-house philanthropic experts and established partnerships with donor-advised funds to facilitate your giving. For more information on the Gluskin Sheff Foundation for Philanthropy, contact 1-416-681-8940 or firstname.lastname@example.org.