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EFFECTIVE PHILANTHROPY MADE EASY

By: Ian M. Fraser
October 2008

Charity is as old as recorded history. Individuals and organizations are motivated to give to charity for a variety of reasons. Some just have an impulse to give in order to help others. However, the fact that donations to charitable organizations in Canada are eligible for generous tax credits also motivates those facing complex tax and estate planning issues.

The full capital gains exemption on gifts of appreciated securities, introduced in the May 2, 2006, Federal Budget, has inspired a renewed interest in philanthropy. Contributors not only receive a donation receipt for the full market value of the donated securities, they also avoid taxation on the increase in value over the adjusted cost base.

Effective Philanthropy

FEATURES AND BENEFITS

In this article, I’d like to introduce the features and benefits of a charitable gift fund (CGF) plan, an effective giving instrument recently introduced into the Canadian marketplace by the Charitable Gift Funds Canada Foundation (CGFCF) and some of Canada’s major financial institutions.

A charitable gift fund (CGF) is essentially a donor-advised fund, a giving vehicle that combines, for the donor, immediate tax benefits with the ability to periodically support favourite charities on a flexible timetable.

Many Canadians derive great joy from charitable giving. But, as the list of deserving charities grows longer and longer, some donors begin to feel overwhelmed by the complexities of active philanthropy.

With the writing and mailing of annual cheques, many of which require explanatory cover letters; with hurried decisions at yearend on which of their favoured charities will receive donated shares of appreciated stock or mutual funds; with doing the paperwork for those asset transfers to a dozen different grant recipients; and then keeping all the detailed records for reference at tax time, donors are increasingly looking for ways to simplify the giving process. The charitable gift fund is proving itself to be an appealing solution. Attractive features of a CGF plan include:

  • Individuals and/or families are permitted to place irrevocable contributions of personal assets (cash, securities, mutual fund units) in a perpetual gift fund account. Donation receipts are issued for the full value of the assets contributed in the year a contribution is made. Granting decisions can be made immediately or be deferred to a future year.
  • Prudent investment management and ongoing administration of contributed assets is handled by the sponsoring foundation, usually in collaboration with the donor’s investment advisor. Earnings generated in the CGF annually become available – each year, every year – to fund worthwhile charitable projects of the donor’s choosing – often in perpetuity.
  • Privacy can be protected, if a donor so chooses. Because grant cheques and cover letters are prepared by the sponsoring foundation, donor identity can be shielded from a recipient charity (if, for example, the donor would rather not receive its solicitations).
  • Pricing is competitive for the investment management, gift administration, and grant-making services provided and it is often much less than the ongoing costs of creating a private foundation.

GIFT PLANNING STRATEGY

A charitable gift fund plan helps prospective donors shape a well-considered gift planning strategy, strengthening the charitable impulse while simplifying the management of their philanthropy.

Ian M. Fraser is a consultant in philanthropy and serves as executive director with the Charitable Gift Funds Canada Foundation.

 

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