Managing your Charitable Gifts: session 2
Marvin J. Schmidt and Founder of Tapestry Philanthropy Partners Lauri Thompson, explore the challenging topics surrounding a philanthropic strategy.
[Marvin J. Schmidt, CIMA, CFP, TEP, B.Comm.,
Founder and Principal of The Schmidt Investment Group,
Senior Wealth Advisor, CIBC Private Wealth]
Good evening, everyone and welcome to part 2 of session 2 for magnify your charitable gifts.
Hopefully the last week families were able to chat together and just discuss some of the topics that were brought up and some questions that you may have posed with each other, discussing values and just the direction that you as a family want to go or as individually or as a couple want to go.
We welcome again all our clients from coast to coast here this evening and glad to have Laurie back for session 2 out of Vancouver with us with Tapestry Philanthropy Partners.
And so, today's evening session is going to cover of the next round of topics, which is going to be a lot more about how to engage the next generation in the planning side of philanthropy.
Also, we’re going to take a little bit deeper dive into private foundations and public foundation, pros, and cons, things to consider just to help people a little bit more with that.
And then also looking at kind of next steps and bit of a road map whether you have an established foundation already or you're considering the foundation or donor advised funds.
You know, regardless of where you are in your path, we want to just kind of map out the next steps to elevate your philanthropy strategy itself.
As alluded to last session, I want to remind everyone that we will be taking questions all throughout the 75-minute session here.
So, on the top right-hand corner on your screen, there is that Q an A area so type your questions in as we go directly on your screen.
I very much encourage again you to take advantage of this.
We do have one of the top philanthropy consultants and strategists with us here through Lori.
So today is a great time to take advantage of her knowledge and experience through that.
So, with that, I will pass it over to Lori and we will get right into the meat of the agenda tonight, Lori.
[Lori Thompson, Founder, Tapestry Philanthropy Partners]
Hello, everyone.
It's nice to be here.
Happy to be with you again today.
We had such a nice time last session, and I really enjoyed the conversation and so we're looking forward to digging into a few more issues again today.
So, where we will start is with an agenda and so we will follow up on some questions people followed up with on last week's session, do a few reviews on a few issues.
We'll talk about the engaging the next generation in high impact given which Marvin alluded to right now, the elements of a giving strategy, a couple trends in giving, the question do men and women give differently, planning for charitable giving in your will, effective giving strategies for different personalities and then moving in a fresh direction.
Next slide, please.
[Marvin]
So we thought we'd start this evening session to see, I know we have the clients from coast to coast here, still don't have all provinces on here but first polling question is in 2020 which province was the most generous regarding charitable donations in Canada.
Was it Alberta, Manitoba, or Ontario?
The most generous province in giving.
So, if you can put in your answers on screen.
We will leave it open for a few moments here so please put in your answers.
We see that it is a bouncing back and forth here a little bit.
Give it another few moments just to let the last respondents come in.
Sorry, Lori, we don't have BC on here so I'm not sure where BC is going to land but it’s not one of the options tonight so.
Alright let us give another 5 seconds here and see if my home province here is are the winners or where it is?
So, let's close the poll here, I’ll close it and let that tally it up. And so, what we see is Alberta is the winner.
Clearly the Eskimos aren’t into doing anything for us, but the generosity is high here in Alberta.
You want to speak to that at all Lori?
[Lori.]
I do want to speak to it.
So, I realize just as I saw this, that my stats that I have are for 2018 so this is my fault.
I asked the question in 2020 and my stats are for 2018.
The answer is 2-fold, so Manitoba had the highest percentage of tax filers that donated to charity amongst the provinces at 22.4%.
Manitoba also donated the highest percentage of its aggregate income to charity amongst the provinces.
But among all the provinces and territories, the highest yearly average dollar value of charitable donations was in Alberta at $2,776 followed closely by British Columbia at $2,575 and then Saskatchewan came in 3rd.
[Marvin]
Well, so the respondents were partly right to by having the most respondents saying Alberta with the $2,776.
So good that we're pulling our weight here as the province, even in 2018, given that energy industry has been a really difficult and yet there's a lot of generosity in our province.
Certainly we see that here with certainly clients that's for sure.
[Lori]
Next slide please.
So we wanted to dig into a few questions people had from last session.
A few people followed up with Marvin and we realize that some of the things we talked about could use a little more time.
So, we thought we would follow up with a few things.
The first is just a general reminder on why to have a giving strategy.
So, in the poll, 75% of you told us that you don't have a giving strategy and the main reasons were you don't know where start, you're not confident that the charities will spend money and life is busy and creating a giving plan falls to the bottom of the list.
As we know from the research, your experience bears out.
In fact, that those 3 things are very real concerns for people and very real barriers as they create given plans.
The reason to create a giving plan, just to reiterate it, is this estimate that by 2026 there will be a 25-billion-dollar social deficit in Canada that Imagine Canada tells us that.
I think the discussion about maybe I’ll wait to retirement knowing that these gaps are getting more significant.
The idea of building a strategy to ensure that we get where we need to get.
So that this money that's on the table that I talk about, people saying my goal is to give 100,000, I only gave 5,000, the reason it's all these really valid reasons but I think flexing that muscle and using that responsibility for good in our communities, I think is really important.
The other question of that it transforms us.
And so I thought of an example this week of someone who spoke at an event in Vancouver, a billionaire in Vancouver said, he said I like having money, I like being comfortable, I like having a house in Italy, I like having beautiful cars and I like going on nice vacations but he said the only things in life that have ever made me authentically happy is having children and giving my money away.
And I think that they would say that science supports that, that it's a real kick to give money away that it, you know, our endorphins, you know, it sets off our endorphins.
And so, I think the transformative power for us of being reminded about all the beautiful things that are happening in the world and creating a strategy to ensure that we have the discipline almost engage in that transformation in our life is important.
And then the last thing is because we can see every day that our neighbours in communities need it.
So, like the rest of our life when we don't plan for things we’re less likely to do and so my only goal for us is just to make sure we give everything we plan on giving each year.
I’m not telling people to give more money or less money, just that we reach those goals each year that we have for our giving.
Giving in Canada versus the U.S. is a question that came up was from someone and I still can't speak to the answer of the why but I did want to offer you some statistics that I had said that I had on hand.
So, the Fraser Institute did a 2020 generosity report.
Studies show that in the U.S. the extent of generosity is nearly 10%, 10 percentage points lower than in Canada.
I think that's a surprise to a lot of people.
So, 9.7% of tax filers in the U.S. give to charity compared to 19.4% of tax filers in Canada.
The result is in sharp contrast to the 2017 edition of the generosity report where the U.S. was 5 points higher than Canada.
So, they were 5 points higher than us in generosity, they are now 10 points lower than us.
I would be fascinated for them to tell us why that is.
I'm sure we can some assumptions about that around health care costs, those kinds of things.
Marvin I would be interested to know if you have thoughts on that?
And in line with previous versions of the generosity index, the depth of just generosity is just much less in Canada than it is in the US.
So Americans give 1.9%, 1.97% of their aggregate income, Canadians gave .54. So nearly 4 times higher in terms of aggregate income in the U.S.
[Marvin]
Yeah. You know, it wouldn’t surprise me.
I know speaking with a lot of clients that have business, you know, for all these years I think people feel because tax rates are so high here already that that they are giving through their taxes and so maybe not quite as compelled to give, you know, like our southern neighbours given that we have a stronger social net here than in the U.S. and I suspect that has something to do that and I certainly have heard that quite often from the individuals for sure.
[Lori]
What do you think of the numbers being higher of us being more generous in terms of the number of tax filers who give so 9.7% of U.S. tax filers donated to charity compared to 19.4% of us.
They were ahead of us and now they're behind us.
Why do you think that is?
[Marvin]
Yeah, my speculation there would be that that because we come from a framework of a social safety net, I think we believe in that more so which is not contradictory to my comment just a moment earlier.
I think it's more part of our DNA to have a part of it.
But so, I think people want to feel like they are contributing.
But when it comes to dollars or the amount that we give, I think we don't feel like we need to give or have the ability to give as much as the southern neighbours just because of tax rates here, I think is a big, big part of that.
[Lori]
That’s a good point that both those things can be true, yeah.
[Marvin]
Interesting on your comment about the billionaire in Vancouver, had the exact same story and instance discussion yesterday, you know very, very well to do successful young individual with an enormous amount of money and now he's like, well, now what?
I've done it all and I don't think I feel as good as I thought I would having been so successful in business, I got a ton of money, but that's not really what I thought it would feel like having achieved the pinnacle at a young age and he is really looking for a way to be able to impact society, more meaningfully through charitable giving.
[Lori]
And another story like that is a mergers and acquisitions in Vancouver who I mentioned last week said to me that as people are working toward the sale of the business, we tell people what they will be, we don't tell them who they will be.
He said, you know, typically if you have a business successful enough that you're selling it, making a bunch of money, you already have a good income. You can do all the things you want to do it.
He said what he finds is that the night of the sale people are so excited and they wake up the next day and realize that their relationships are more complicated.
Very little else has changed except for their purpose in life, who they are and their relationships.
And that was a really fascinating thought for me of and his point was people need to plan for their charitable giving really early in the process of thinking about their sale because it gets so busy, and they get so hyped up and then it doesn't happen, and they don't have that important purpose to kind of fall back on.
[Marvin]
The other big one was overhead and so I know you have a real interesting element on that that you want to bring up.
[Lori]
Yes, I do.
So actually, can I do one thing first, strategies to ensure funds are being spent?
The order of my notes are in.
So, a few people did come through and say that me saying the charity spend money well doesn’t build enough confidence for them really to be convinced of that.
So, I looked up some more stats for you today.
So, Canada helps that online giving platform did a 2020 giving report and over the 86,000 charities in Canada, they found on average that charities spent only 10% on overhead, one percent on fundraising and 9% on administration, 90% on charitable activities.
So this idea out there that most of them are really living it up isn’t bearing out in fact, in this debt.
The other interesting thing is that 80% of those charities make less than $500,000 in revenue a year and 91% employ 10 or fewer full-time staff.
58% are fully run by volunteers.
So, 58% being run by volunteers, it feels really special to me and it's kind of a reminder to me that the people who are starting these organizations are seeing something in their community that they want to change and think they can be a part of changing and are digging in and doing that, so I found that a very encouraging step.
It doesn't mean as we talked about that last week that those volunteer-run organizations are the most scalable our high quality or high impact, but that vision of people walking alongside each other was a very, very encouraging thought to me.
So Marvin and I chatted this weekend.
We had we thought for those of you for whom you just still are not, it still is a bit of a worry I think that's fine and fair enough and so we thought Marvin had a great idea that one way that you could give that kind of takes the issue of confidence in charitable spending is to give only to organizations who do annual audits with an accounting firm.
You can have a look at their books see the, you know, in-depth information in their books.
The other one is Charity Intelligence is an online platform, it is a charity themselves and they measure charities like really deep dive measurements of charities on financial transparency, cost efficiency, the need for funding, cash and investments relative to what it costs to run the charity, overhead and their impacts.
So you can look up Charity Intelligence and say I’m going to choose their top 10 organizations, their top 100 organizations and just pick the things that I love knowing that someone else is done the heavy lifting in terms of looking at the nuance of how they give and kind of so you don't have to worry about this piece of do organizations spend money well, because some don’t as well.
Some are less organized, some really do well but overall, I think we can have some confidence in that.
[Marvin]
So that website or that organization again to just put it out there is…
[Lori]
Charity Intelligence and that’s a Canadian organization.
Charity Navigator is the same thing in the U.S., they rate and grade is based on their financial accountability and otherwise reporting and impact that kind of thing.
[Marvin]
So, with that and, you know, just deal with charities that do audited financial statements, I think that those are 2 key elements to alleviate that fear for people, great.
[Lori]
And then overhead.
So, if you wouldn't mind doing the next slide, Christine.
So, we talked this week about why people have significant concerns about overhead, and it is the truth that almost everyone who finds out what I do says to me, boy, it's a big concern that how organizations spend their money on administration so it's definitely out there.
We were talking about why is it out there so much was this message so key for all of us?
So, I found this meme that I've seen on Facebook 4, 5 times I would say in the last 2 years and it is actual fake news.
It's legitimate fake news, someone has created this thing that that has all this false information on it for the purpose, I think of getting clicks, monetizing clicks, making money through the because they have made people scared, angry and, you know, irritated to the point where people share and say, oh, my goodness, watch out for these.
So is an example UNICEF it says that they spend $0.14 on every dollar on programs.
The reality is that UNICEF spends 70, 80 $0.88 of every dollar that UNICEF spends on their programs.
American Red Cross has overhead of 10%.
World vision has overhead of 13%.
So that's one interesting thing.
I thought the other thing I would bring up is executive salaries because some of these executives’ salaries aren’t that far off.
UNICEF, the I looked at the CEO of UNICEF in the U.S. and they make $900,000 a year.
It sounds like a lot of money, but their budget is 644 million dollars and so for me I’m okay with them finding the best of the best executive to spend 644 million dollars to vaccinate children in the developing world, to combat human trafficking to get clean water into places to respond to emergencies.
So, I'm not saying that other people have to be confident, comfortable with that salary.
They're very rarely over a million.
World Vision's CEO makes 440 sorry $484,000 a year and they have a 700, 70. 3-million-dollar budget, so I think that's a personal decision for people.
But for me, I'm much more concerned with the impact and the quality and the caliber of the people they have doing that work than I am about paying people on principle, less money because its charitable work.
What do you think of that moment, what are thoughts?
You're on silent I think.
[Marvin]
Yes, absolutely.
You know, there is a fine line, but you do need strong leadership to run these organizations.
These are massive organizations like you said, you know, close to a billion dollars annual budget.
You know, you wouldn't pay someone a $100,000 at any company that has a billion-dollar annual budget right and so we want them to do go work so I 100% support that but I think that makes a lot of sense.
And there is so much full so false information, misinformation, fake news out there and that is for sure is driving that perception that exists out there.
Let’s move to the next polling question here, a quick one.
And this one is which is the most generous giving generation?
I know so a lot of people think is it the baby boomers is it, you know, is it gen x or millennials and so let's just get a quick pulse on this from our audience, which is the most generous giving generation?
If you can put that up.
I know it was an interesting piece of research that came out on that and I wonder if whoever is responding, if you are responding because you think it's yourself, your generation, or that it’s your parents’ generation if you're a millennial, for example, but we will close this one out in just, you know, 10 seconds or so.
All right so it is closed so who is it Lori?
[Lori]
It is both millennials and baby Boomers depending.
So, 2013 actually is the most comprehensive data I could find comparing these things but I do have some additional context to add.
So, in 2013 in the 15 to 64 age category 82% of people gave.
And the 65 plus category about 85% of people gave.
So, everybody's generous.
So that stat isn't all that interesting it’s just to say that that everybody is generous, but boomers are slightly more generous.
The average, this is where things are a bit different.
The average donation for the 15 to 64 year-olds is $488.
The average for 65 and above is about $730, so significantly more as people age.
And I think it's what we expected.
However, a new survey by for that Fidelity Charitable turns, at least one assumption about millennials, and we know the assumptions, the jokes about millennials, on its head.
They are very generous bunch, so Fidelity Charitable looked at entrepreneurs, millennial entrepreneurs and boomer entrepreneurs and looked at their giving.
They found that millennials on average and this is in the U.S. donate make $13,654 per year.
Gen X and baby boomers do $6,000 per year, so more than twice as much for millennials with money.
And they say the reason for that is because the market requires the millennial market requires companies to have values, so it's an important branding proposition for people to give.
The other thing is that there are many activists and so they're online all the time and they're seeing issues combating trafficking, they have climate change anxiety often they're saying, you know, issues around inequity in the world and that kind of thing and so they're giving at rapid paces online in ways that we in our generations do much less off.
But I thought it was such a neat encouragement that I think of I have these worries for our future too I have worries for young people who are growing up right now so to see that millennials, when they have money in their hands, even when they don't have money in their hands, they’re generous and give often, but the when they have money, they give a significant amount.
So, I'm just hoping, they’re going to create a bunch of great technology around climate change, I hope that they're going to create a big network, you know, worldwide network combating human trafficking.
So, I have, it gives me a lot of faith in the future.
[Marvin]
Fascinating, fascinating.
[Lori]
Yeah.
Next slide please.
Engaging the next generation in high impact giving, we touched on this a little bit last week and I think the main thing to say is that different generations give differently, and we know that.
As I said, millennials and younger typically are real activists generations and my age and older are typically giving more to kind of the social causes that we see in our neighbourhoods, that kind of thing.
I think in terms of an example, the biggest thing that I see happening is for older donors to come to me and say I am so excited to give our kids this opportunity, or our grandkids this opportunity, to take our foundation and we're so excited that they're going build this legacy for us, these things that are important to us but their vision for what they want to see happening in the world is so different from the next generation.
So, if I was to give to my the things that are important to my parents I would be giving to my local church and I would be giving to missions organizations.
Those aren’t my passion.
My passion are some of the things that we discussed before around kids in care and foster care and climate change and combating human trafficking.
So, I think that is quite a typical scenario, it's a conversation I have often with people.
So suave, philanthropic advisors in the U.S. say give the money with no strings attached so not here's some money we're so excited for you to give and please see our vision through but rather here's some money and what do you love and what's important to you?
And so, the thing I recommend people that they do is go to a website, like Charitable Impact which is an online giving platform where you can send charitable money to someone else.
So, you have your own receipted charitable money and you can send $100,000 to your sons and daughters as an example or whatever those amounts are.
Give Christmas gifts in addition to your regular gifts to your grandkids, send that money and say spend it however you like, and we can't wait to hear about it.
We're going to get together the next holiday gathering, whatever that is, and we're going to set aside 2 hours, and everyone is going to go around the table and tell us the thing they gave to that they love and are excited about.
And you can certainly create some value, you may have some no-go zones in terms of what you're comfortable with and giving to, but I think that's where you'll see the fire get lit and I think and the other thing is that say you have 3 children, the fire might get lit in one of them to give, they're going to be really drawn to charitable giving and the other 2 might not.
But that's kind of your testing ground to see who gets excited and engaged.
I think it's the most, I think it's the litmus test for if they actually really are excited and willing to take on your giving.
I think also being straightforward about what you want your legacy to be and honest with what you want your legacy to be.
So, for my parents, I would say to them give all your money away while you're alive and I will give my money that I make, or I will give some of my inheritance to the things that I love, but it's your money and you spent it.
So, if your legacy isn't going to be borne out by your kids then, or your grandkids then I think really have the freedom to make a decision to spend that money down in your lifetime and be generous and do the things that you want to do.
And then the last thing is just encourage your the next generation to connect to people their age around giving, there are lots of opportunities to talk about giving.
Share your values, share the thing you love with them, but I think that they will do well to build their own causal areas of interest, to build their own networks, to build their own resources around these issues verses I'm gonna teach them how to give in the way that I give.
Next slide, please.
Marvin, do you have any thoughts on engaging families in charitable giving, I know that you had lots of experience in this area.
[Marvin]
Yeah, you know, my biggest thing would be that if you want to make it a legacy and intergenerational and beyond, you know, the matriarch’s and patriarch’s lifetime you need to have them involved with you and it's got to be part of their vision.
The children you need to give them the freedom to direct the giving and the approach and the strategy, you know, part of that has to be with them for them just to take it over, it’s very rarely successful that way has been our experience.
It usually dies when the parents then die and so if there's a longer-term vision with this, get children involved early and not just to listen to you, but to actually take part of it.
So, to your point Lori, the children have a shared vision for sure with you.
[Lori]
So, let’s just talk about a quick reminder in preparation for later on in the presentation the elements of a good giving strategy and some of you may be on the call today who weren't on the call last week.
So, a strong giving strategy is going to address your own values and priorities your charitable values and priorities, your causal areas of interest.
Again, many people haven't been asked what they're actually excited about interested in that we can help you through the process of looking at different areas and deciding individually what your causal areas of interest are again, each person in a giving unit if it's a private foundation, each person should be going through the process individually so you can get the beauty of the giving sort of representing diverse perspectives on giving, doing your research and vetting, thinking about your personality, am I an introvert or an extrovert.
I hate to make that binary and simplistic, but I think it's very relevant to a successful giving plan to address the realities of your personality and what makes you tick, what gets you excited and then your granting and reporting, what do you want to see back from charities?
Next slide. Please.
[Marvin]
Now we go into the 3rd of our 4 polling questions.
Very simply put who are more likely to create a charitable strategy, men or women?
So, let's see what our responses out.
Who's more going to take the bull by the horns and get into action with their charitable strategy in developing that and moving forward with that.
So, if you can answer your poll out of the pool here online and we'll see what people are thinking.
It seems skewed one way, so it looks like everyone is unanimous pretty much here that it's the women.
So, yay for the women, they got 100% of the votes on this one itself why is that Lori and why should we actually be, you know, concerned or actually spent some time recognizing the significance of that reality?
[Lori]
That is fascinating and I don't even know the answer why.
But you are correct.
Approximately 2 3rds of the women in a Fidelity charitable study had a charitable legacy plan compared to a little more than a 3rd of the men and more women than men indicated that they had created a mission statement and a set of goals.
So, I don't know why that is, but we probably don't need to explain it if everyone agrees to that so that's great, thank you.
Next slide, please.
So, I’m going to go over this one quickly, the differences between how men and women give.
It's not that we're trying to say this is how men are and this is how women are and you know, that's the way it is.
I think the point of this one is just to say that it's important to have a diversity of perspectives in giving and like in any of our portfolios or any of our businesses, it's important to have a diversity of thinking.
And so the data isn't entirely clear on how men and women give, but a 2018 a study suggests that 65% of the donor community is female, another study says that men give more and more often so we don't know totally what the answer to that is but we do know that when women give they're more likely to give towards youth, family, health, international causes and then men are like more likely to choose religion and education.
Women tend to give to a larger number of organizations spreading their impact and they say psychologically, and this is maybe like an evolutionary perspective type thing but certain observed psychological factors come into play that women are more inclined towards empathy and more risk averse, which could explain why women respond to need and give to a greater number of charities.
I think one more thing is compared to women, sorry compared to men, women were also more likely to give locally.
So, I would just say this charities often spend all their time approaching men for whatever reasons, the patriarch.
In your giving plan or your giving circle and gauge all the people in your giving circle equally, if you can, so that you can get a diversity of causes and concerns happening, so you can get a diversity of ideas around how many charities to support and that kind of thing.
The big thing I think is just that a diversity of perspectives makes for better giving.
Next slide please.
I’ll go through this one very quickly, because I think we're going to be getting a bit short on time there.
So, a couple neat trends in charitable giving, trust-based philanthropy giving is one of them that I think is fascinating.
There are many big, big, big organizations in the U.S. that are saying, we now realize that there's this real power gap between our foundations and charities and it's not producing the best results.
Charities are writing proposals that the week they think that we want to, you know, things that we want to have done vs. what they know needs to be done because they’re the experts, we're requiring way too much work and time of people and that's why organizations are struggling financially because they're spending all their time writing giant proposals to us and giant reports.
And so just some interesting themes that are coming out in terms of trust-based philanthropy is to say the people of the organizations that are big and thoughtful and where you're confident in how they spend their money, say to them, give multiyear gifts of them, say to them, say we're going to give for the next 5 years this million dollars a year, this 500,000, $100,000 a year you're going to get for the next 5 years and send us 2 or 3 pages every year on how you're doing and if we need to change that, we’ll let you know.
Send us a proposal that you wrote to someone else don't even change the name if you don't want to.
I say that to people sometimes, you don't have to go through this twice.
When you send us reports, keep it absolutely brief and to the point because we're probably not going to read it anyway.
And then be transparent, responsive.
I know many organizations who are saying to the charities, how has that experience been working with us, and charities say things like you require so much of our time that we actually are not getting as much done as we would like and the donors are responding well to that.
So, I think in terms of the sector and our concerns about money not being spent well, trust-based philanthropy is a really neat thing in that regard.
Marvin should I just skip over impact investment do you think given our time.
[Marvin]
I think you get a quick touch on it.
[Lori]
Okay.
Impact investments are investments made with the intention to generate positive, measurable social environmental impact in alongside a financial return.
So, the U.S. has been doing impact investment for 30 years, at least, and there are all these funds all over the place that are for the where people are basically saying we're going to do this good thing and we're going to give you a financial return.
So, it’s we have some of these more of these happening in Canada but the net result for funds like this is that much more capital can be raised.
So, one impact fund might say we're going to offer you really, really low interest mortgages to, you know, women shelters so that they don't keep having to move every time real estate prices increase, and someone sells the house that they're renting or there's an affordable housing impact investment fund.
It's basically a private equity affordable housing fund called New Market Funds in Vancouver where they're building many, many, many thousands of affordable housing units in small, small towns where seniors are losing their homes because they can't afford the rent anymore where the people are moving because of COVID into these smaller towns and so money there's money to be made on an increase in housing prices.
And so New Market Funds are people have come from private equity in affordable housing and made a ton of money before and said we didn't like what we were doing over there very much and so they're using their brains to do this really amazing work to build these affordable housing units and offering people a very reasonable return on them.
So, I think the one the one final thing I'll say on this is that someone who has spoken at an event that I was at that donors asked the question, how much is enough?
And for different people, how much is enough?
It's going to be different for everyone.
For one person it's 500 million dollars that’s where I’m going to feel safe, that's where I can give enough to my kids, that's where I can do all the things I need to do and give to charity.
Someone else might say 30,000 someone else might say a billion and we all have our own reasons for what those numbers are.
He said think of your number and make it big and then add 20% to it.
What do you do with the rest your assets?
Do you have to have the absolute highest returns with the rest of your assets?
Why not use the rest of your assets to take some lower returns, not that they always need to be lower returns with impact investment, to take some lower returns to do some good things in the world.
Local food, support local food and farmers as we know in BC right now, our system can fall apart very quickly when we don't have access to local food, those kind of things.
So, we can talk about that again, another time or talk with you but there are increasingly a lot more really appealing impact funds out there where money can be made at the same time as doing good.
[Marvin]
And just to clarify for everyone you do not get a charitable receipt when you do impact investment, correct?
[Lori]
Correct, thank you, yeah they’re regular investments.
[Marvin]
So, you know, it’s not like a donor advised fund, you don't do it through your private foundation.
It is a regular investments just likely a lower return but you're doing real good with it right?
[Lori]
Yeah.
[Marvin]
Perfect.
All right let's go to our next polling question.
What percentage of Canadians leave gifts to charity in their will?
This one actually was a little surprising to me, but let’s open the polls up and let's see what people say.
What percentage of Canadians leave gifts to charity in their will 5%, 27% or 52%?
What we have people here are responding.
So it looks like we have a winner, not a clear winner, but the audience is saying about equal 43%, 43% both said that, 5% 14% of the audience said that actually 52% of people leave money in some way or shape or form to charities but the actual answer, Lori, is drum roll.
[Lori]
5%.
We’ll go to the next slide. And then we can dig into that a little bit.
Yes, so basically the research said eighty-some percent of people know that they can give in their wills, but they're just too worried that there's not going to be enough money for their family and that's the main reason that people don't pull the trigger on giving.
I was shocked by that number, but it is from a really credible source.
I was it was quite fascinated by that.
[Marvin]
Yeah, you know, we certainly hear it right, people say charity begins at home, making sure the family, children, grandchildren, nieces, nephews, are taken care of and so I think that's why.
I thought the number would be actually higher than 5% but that is what the statistics show so.
Then we move into this next piece here, planning for charitable giving in your will.
So, there's a number of different ways to do this and so just want to briefly speak on each of these.
So, for example, you know, you can take out an insurance policy and with the insurance policy, you can name the charity the beneficiary of that policy and then when you pay the premiums, so say you take out a million dollar policy and it's going to go to a charity and you make it, if it’s going to charity and you want to get a charitable receipt the beneficiary needs to be an irrevocable beneficiary which means that you can't say it's going to be the charity as a beneficiary and then 2 years later, you change it and put your child on, or your friend on there, you can't do that if you're going to want a charitable receipt.
If you don't want a charitable receipt then I guess you certainly can do that and change it however you want but if you want that charitable receipt, you do need to make it an irrevocable beneficiary i.e. you cannot change the beneficiary once named.
Now not to lead you down the wrong path here.
You don’t, if it’s a million-dollar charitable benefit insurance benefit that would pay out upon say your death, you don't get the tax receipt for the million dollars, which is the benefit, you get the receipt for the annual premiums that you pay.
So, if you're paying $10,000 a year for that insurance premium, that's what the charitable receipt would be for is that $10,000.
So, it's a great way to be able to fund, you know, a very substantial legacy gift you know, in your memory for a charity for small dollars during your lifetime and so that is one way.
Another is what's called a charitable remainder trust and in fact, we just are closing out one of our charitable remainder trusts for one of our clients.
We originally set it up back in 1997 and they were very philanthropic and at that time they sold their business and they wanted to, they knew they could set aside some of their money's to the charity and they wanted to take advantage of getting the tax receipt now for directing those funds to the charity through a charitable remainder trust.
So, say it's a million dollars.
You put a million dollars in this charitable remainder trust.
You are say 70 years old or 60 years old, and that million dollars ultimately will go to them but all of the income off that million dollars, as long as you are alive, you keep getting paid all the income off it.
So, it's a million dollars and say it’s earning 5%, then $50,000 a year you can take as income.
The charity doesn't get the million dollars yet they only get that when you pass away.
So, what you what happens is that the tax receipt that you get is for the present value, the discounted present value of the million dollars.
So yes, it is the million dollars that goes the charity, but because they're not getting it until you're expected actuarial death toll, so if you're 70 years old, actuarial tables will state that you would live to stay around age 90.
So, they put a discount presents value on that million dollars and say that’s $500,000 for simplicity sake, you get a $500,000 charitable receipt today to be able to deduct off your income and carry it forward and you'll get the continued income off that million dollars for as long as you live and then when you pass away, the proceeds goes to the charity.
And like I said in 1997, we originally set, you know, one of these up and now, unfortunately, sadly our clients have passed away this last year and now they the charities are getting the remaining amount.
That's what's called a charitable remainder trust.
Whatever remains in that trust, they now get again that the clients can't take any capital out of it, but they can take any of the income out of whatever that has earned you know, each year as long as they're alive.
The other thing is with securities, you know, we actually just this afternoon in a client meeting, clients were wanting to give, you know, 150, actually $160,000 to 3 different charities and they had a big capital gain in their portfolio on a particular security.
So, what we suggested they do is gift that security in kind to those 3 charities and all of the capital, again, in this case, it was a over 60% capital gain on that particular investment, they don't have to pay any tax on that and then they get $160,000 charitable receipt as well.
So, it's way more effective to do it that way then it would if you're just going to give cash like to sell a security, you now pay the tax on that 60% gain and then you have much less leftover to give to the charity.
Whereas if you just gift the security in kind to the charity, you pay no tax and you get the full charitable receipt.
Now we don't suggest to do this with, you know, $1000, $2000, you know, these should be larger sums of money generally but it's a very, very effective way.
So, for example, if you're going to want to give some money to charities through your will, in that will we really want to ensure that you indicate that your executors should be gifting the securities with the largest capital gains in your state to the charities because then your estate will not pay the tax on that and still get the benefit of a charitable receipt.
So, and therefore, more goes to the charity and more goals to your beneficiaries, family friends, you know, etcetera.
And of course, you know, cash you can always do but, you know, with some of these things, they need to very specifically be written into your will to maximize and magnify your charitable gifts and certainly with any of these we are more than happy to discuss this in more detail with you if you have any questions or information that you want on this.
So next, slide.
[Lori]
So, we're going to talk again about effective giving strategies for different personality types.
The first thing that we've probably said already is just to be honest with yourself about what you really want.
What do you enjoy without feeling the obligation of doing what the system sort of requires right now?
So, one question I ask people is do you like going to events, do like going to galas and so if you're in a couple situation one person may enjoy it and the other person may not so you have to figure that out between you.
But a lot of people are just relieved to know that they don't ever have to go to another gala in their life or they don't ever have to ever go to another event in their life and it sort of changes the way they feel about giving in general.
Or for the people who, you know, we talked about it last week of just like I really like to have a coffee every year, I appreciate it, I feel not like a wallet when I, or an ATM machine, when someone builds a relationship with me and takes me for a coffee, and we have a conversation.
So, once you decide what works best for your personality tell the charity's what you want, list it, really explicitly.
I'm going to give to you every year for the next 3 years or you don't have to do that if you want to just get one year the time, please contact me in October that's when we're home and like to make our giving decisions.
Please contact me just by email the rest of the year.
Please take me off your mailing lists.
Do invite me to events.
Don't invite me to events.
Again, those fundraisers are thrilled to know what people want because then they can scratch you off their list and they don't have to try and track you down.
It's very liberating to do, I’ve told charities please don't ever send the physical mail ever ever again and they don't do it and I'm so happy to have an empty mailbox and I’m much more likely to give as I'm able to do it the way it like.
We talked already about if you don't want to engage really personally, give to organizations that don't require up-close up-front vetting, do something like charity intelligence or audited financials.
Or the other thing you can do is bring someone onboard who can do that for you.
If you have a family member who is known to be someone who really enjoys this kind of thing, ask them if they're willing to do that for you and take the pressure off yourself to have to do those meetings.
And I'm not trying to assume that the only challenge are for introverts but I think in this context being introverted provides more of a challenge as it relates to the current system where in-person engagement is sort of the way people are pursued by charities so really giving them the information is helpful.
Next slide please.
Oh you're on mute again Marvin.
[Marvin]
Sorry about that.
Thank you, Lori.
So again, just a reminder for anyone that has any questions, please type them in in the top right-hand corner of your screen.
So, want to dig a little deeper because we did get a number of questions after our last session, just where people want us to dive a little bit deeper about looking up private foundations, pros, cons and compared to donor advised funds.
I know we talked a very high level about them last time, but we want to just delve a little bit deeper into that in tonight's session for you.
So first of all, the private foundation let's look at what the pros are here.
Well, one is personal satisfaction in operating a charity, you have really full control of that you’re not really answering to anyone else.
I guess you can put in place a board, but if it’s a private foundation, the board frankly can be just strictly your family members itself unlike a public foundation.
You know, there you have to have an independent board of directors. As a family you can sit on it but it would be controlled by the board itself.
So private foundation really you have a great flexibility there and satisfaction and really running your own your own charity which, you know, may seem like a lot of work or may not, you can make the decision based on how we go through the next few slides here.
Next is you can choose who you want to sit on the board of your board of directors and who can make decisions about charitable endeavors.
So again, based on your causal areas of interest as Lori indicated, you may want some other board members to be part of your board because maybe they're really excited about it as well and being able to be part of it.
And I’ve certainly seen a lot of real benefits of adding some other people on to the board, even though it's not necessarily their money that they're giving away, but they provide some really good insight on that.
The investments of the foundation can grow tax free.
So unlike if you just kept the money yourself and then you just give, you know, directly through cash gifts or security gifts every year, if you do it through a foundation, you can have this pool of capital say it’s a million dollars or 10 million or 50 million dollars whatever the case is, whatever is in that foundation, all of that money will grow totally tax free to the benefit of the charity.
And, you know, I know there's this family that I recently met with that is, you know, looking at, you know, they were doing all their donations personally, just work through cash and now they're going to, you know, put a lump sum amount into their own private family foundation and just from the earnings of this lump sum pool of capital is going to, you know, make up the donations that that they will do so basically they're endowing their own foundation.
It provides greater and lasting public recognition.
Now, I know that may go a little bit contrary to some of the things that we said because private foundations are public and donor advised funds, you know, are more private but you know, this providing greater lasting public recognition.
You know, if some people want to name their foundation, you know, quite anonymously so it isn't really out there as much, other family members want it to be the Harry and Mary Smith Foundation.
And you know, that foundation name and legacy can continue on for many years.
And I know, you know, in our city of Edmonton here and in many cities, you know, a lot of people know certain families based on their family foundation whose been supporting their community or their different causes.
For some people that may be important, for other people that may not be what you want, but certainly the private foundation does provide that kind of a legacy of lasting public recognition.
Having a family member or professional run the foundation and compensating them for that is really popular, I am not sure Lori if you want to comment at all on that.
I know you see this quite a bit and why families look at that a real benefit, do you want to just maybe add something there.
[Lori]
Yeah, I think that I think it is, that's a real benefit of a private foundation to be able to hire someone who you know and trust to who can, it's a very personal part of our lives and so I think it's nice to be able to hire someone and pay them to see through our charitable wishes and dreams.
[Marvin]
You know, you can also do some fundraising activities.
You know, some of these would not, as you'll see with the donor advised fund, some of these are not really available with donor advised funds.
But if it's your own private foundation you actually can run some fund raising activities if you still wanted to.
You also can do some charitable activities, meaning some actual programming type work directly yourself if that is something that is important for your foundation.
You have unlimited flexibility on size and timing of gifts.
Whenever you want to gift you can gift and you're not stuck to a certain, you know, once a quarter or once a year or minimum $10,000, whatever the case may be with some donor advised funds with your own private foundation you have all the say that you want with that.
And you can invest much more broadly and able to earn a higher return in a private foundation typically than, you know, a donor advised fund that is a little bit more limited generally speaking.
So next slide.
Now there are some cons to a private foundation.
One is it involves higher set up costs and ignoring, you know, an ongoing administration cost.
What does that look like?
You know, set up costs with a lawyer, you know, could be, you know, we set them up as low as you know, $3,000 for some clients in the past and but depending on the complexity of the foundation, how you want it set up, you know, it can be certainly more than that as well.
But it's not astronomical.
And then there's ongoing administration costs right.
There’s an annual tax filing that has to be done but again, you know, that might be a few thousand dollars, if you're going to get your foundation audited, usually for private foundations, they're not audited.
If it's more of a public foundation then certainly it's much more common.
But so, there are some, you know, initial cost versus just given a check and being done at that, you know, maybe like a donor advised fund.
Other one here is need to apply to CRA for registration number.
And right now, for example, even if you wanted to set up a private foundation today, the fastest, you know, you could probably do that is probably 4 months, 5 months it's a bit of a process.
It used to be a bit shorter, we’ve seen it as short as 2 to 3 months and as long as you know, over a year, even but typically are, you know, in that 4 to 5 months, time frame.
Tax filing requirements kind of goes with the you know, some administration costs for accounting filings.
You need a lawyer to handle the process of setting up the foundation.
Regular required board meetings.
Now those can be as simple or as or as sophisticated as I guess as you want.
The directors and donations are on public record and then the fiduciary responsibility for everything done in the foundation's name is the responsibility of the donor and director, you know, you are responsible for this pool of money in the foundation and CRA does keep a close eye on that to make sure that everything is run properly.
A private foundation is required to produce the same public reporting as other registered organizations.
So, you know, if you're going to report it's going to be very similar as that.
And then there is the same 3 and a half percent of the assets in the foundation must be dispersed annually you can, of course, do as much as you want but you cannot disperse less than 3 and a half percent.
And right now, we're actually in Canada in the midst of whether that number's going to move up from 3 and a half per cent.
I know there's a big move currently to move that 3 and a half to maybe 4, 4 and a half or even 5%.
And I know there's some conflicting views on what that right number should be but right now it's 3 and a half percent.
So those are some of the high-level pros and cons of a private foundation.
Again, you know, on a session like this hard to get into the nitty gritty with this topic, but certainly we can speak, you know, much more with the with you individually if you chose.
The next slide.
Now if we look at donor advised funds, they are super easy to set up and maintain, you know, if you want to setup a donor advised funds, you know, we could do that, you know, within a day or 2 here in our office no, no problem.
And so very quick and easy.
There's no management directly by the donor of operating the foundation that is done by the donor advised fund organization and there's a number of, you know, well, recognized donor advice funds out there, that exist.
And so CIBC is connected with a major donor advised fund and it’s very easy to run for individuals.
It really is a plug and play.
You want to gift to these causes you know, they need to be registered charities obviously.
But you want to gift to these causes, you drop in $25,000 or $500,000 or whatever the case is, you want X amount of dollars a year to go to those causes and you just direct it.
It's really, really, quite simple.
You only get one charitable receipt so you don't have to worry about, you know, giving to a bunch of different charities, you still are gifting to a bunch of different charities, but it's all going through the one donor advised fund which means that’s one slip in February you print it off and there you're done.
You fund your account and get an immediate tax deduction and can decide over time when and how much to grant charitable cause.
So again, put in $100,000 and you can get your receipt today for that full amount and over time you disperse as you wish.
There is that 3 and a half percent minimum still dispersed important generally speaking in a donor advised fund.
Sometimes you can get away with not doing the 3 and a half percent in a given year but really you should plan to at least disperse out 3 and a half percent from your own donor advised fund.
You can make anonymous donations from your account so no one would ever know if that's important to you.
You can choose what the name of the account is and who the donor is just as you would with a private foundation so if you want to call it the Mary and Bill found Smith donor advised fund you can do that or call it, you know, ABC Donor advised fund.
You can choose successors to the donors so there is a legacy element here.
So, say you put $100,000 into this and you then passed away you can have your next generation continue on and take over the direction of those dollars that are in your donor advised fund that you established in your lifetime.
The investments in the fund can also grow tax free same as a private foundation.
Next slide.
Then what are some of the cons?
Well, the public foundation has ultimate authority over the distribution of the funds.
So, you know, you put your money in and the foundation, the public foundation, they ultimately have that authority on the distribution, although almost at every scenario they will honour your request of directing the funds to whatever charity ultimately you want as long as it's a charity in good standing and is a recognized registered charity, there usually isn't any issues with that.
But they do, I guess, still have the ultimate authority.
There is usually an annual cost to have an account through a donor advised fund in addition to the fees to manage the investments.
So unlike a private foundation, there isn't a stipulated annual say half a percent management fee plus the investment management fees with a private foundation it’s just the investment management fees and that’s it.
And then, you know, a little bit of accounting and or legal fees annually but a donor advised fund typically has a stipulated percentage of administration costs that they charge out.
There may be a processing fee in some situations and a donation fee every time you direct a donation out of the account so there are some additional fees that exist there.
You do not choose the board of directors or trustees so there's that isn't in place at all.
Some donor advised funds may not be as flexible as private donations regarding size and frequency of gifts.
So sometimes these donor advised funds, you can only do it, you know, ex amount of dollars minimum every quarter.
And so that's kind of what you have to be around.
And the last one is they can be really quite restrictive on investment strategy, certainly not as open as your own private foundation.
So therefore, typically the returns would be a little bit less because there they take a much more restrictive view on investment management generally speaking.
So that gives it a little bit of a idea as to the differences between, you know, private foundations, and donor advised funds.
Next slide.
[Lori]
Great, thanks for that.
It's good that I really like all those details.
That's really helpful.
So, I think what we want to do in these last few slides is just say that wherever you are in your process, however, big your giving is in this moment or relatively small it is in this moment or your capacity to give in this moment, we would love for people to be able to just rejuvenate things and set things up in sort of a fresh direction.
Next slide.
So, we have created a road map here, we can send this out to you.
We encourage you to look at every stage in this road map and say, have I handled this particular stage in the road map in the way that I would like to be.
So defining your charitable budget with Marvin and the team, coming in saying this is how much we want to be giving away this year and how much we need to be giving away each year, identifying your goals, defining the things we've talked about, your giving values, your causal areas of interest, doing your research and vetting, if you do want to do research and vetting, deciding on the giving vehicle, this list is actually probably the best I've seen in terms of pros and cons of the different giving vehicles, whether it's a private foundation or a donor advised fund.
Setting things up for success with your personality, creating a reporting structure that works both for you and the charities, communicating to your charity partners what you want.
One of the most important ones there implementing your plan and then reviewing your plan every year and saying, how's it working for us?
Are we getting the money, are we enjoying it, are everyone's needs being represented in our private foundation is an example.
So, reviewing and tweaking and then planning for succession planning for what happens if something happens to me or what happens once and gone, how am I going, do I want my successors to take this over, do I want to spend this in my lifetime?
So, asking those questions to yourself and I think it's quite an easy the list to just go through and check off and see what you think.
Next slide.
[Marvin]
I would just add to that just maybe for a moment, if you go Christine, on that, I would just add that, you know, maybe you're the situation whereby, you know, you feel like you've done number one, you've done number two but then you're kind of, you know, you done 5, 6, and 7, but you kind of missed number 3 and 4, and you’ve just been giving but haven't done a ton of research or vetting them or looking at the audited statement with things like that so, you know, you really the hope here is that you can look at this list.
Where are you at?
Have you done it all in this order and if not you can you elevate your giving strategy and you're giving impact and it doesn't necessarily mean that you need to do all it right?
If you want to explore some of this with ourselves to help you with some of this or to engage Lori for any part of this one to 12 piece you know, Lori can step in and just help out on number 9 or number 5, 6, for example, right?
It doesn't mean that, you know, Lori and or ourselves, you know, need to be involved in all of it.
It's just what in these 12 different steps can we collectively do to help create a stronger impact according to your values and your interests to just really elevate, you know, this element.
You know, many people on this call they have their own business or they sold their business and you would look at spending 100,000 or a million or whatever the dollars were in your business, you know, very, very thoughtfully and you do a lot of due diligence and we just encourage people to take that same approach whether it be you or you hire people to do that or, you know, like I said Lori or ourselves help out with that just to make sure we elevate your impact as much as we possibly can.
And that's really what we are desirous to be here for that.
With that next slide here and so are there any questions just want to know if there's a few things that pop up as we went and try to bring some of that into the conversation.
But are there any questions for anyone if you want to maybe just go to your top screen, you can type in there and we will just address anything that might still come up for people.
Anything, Lori, that you want to add still.
[Lori]
No thank you we got through a lot of information there.
[Marvin]
Just while people are thinking through that a little bit and putting in a couple things in, I just want to again, reiterate we will make this slide deck available so if you want us to send you the slide deck, we can make that available to you from the session and the last session.
It will be on playback on our website here next week, I suspect it will be there by then.
We will also send out the playback and link for it feel free certainly to shares it with anyone and, you know, we're here to help however, we can.
Lori, do want to just speak to the way you work from a pricing standpoint, we're just going what is your model I guess if someone wanted to engage some support with you in one or any of these areas.
[Lori]
Yeah so the main thing people hire me to do is to help them to create their giving strategy, finding their causal areas of interest and creating a plan that works for their life.
That's a $2000 process usually takes in the neighbourhood of sort of 6 to 8 hours I would say your time.
And that's over the course of 2 or 3 meetings, which we can do by zoom.
I'm also happy to come to Alberta to meet in person if that's easier and better and I can see that that might be easier and better.
But that's the thing that most people hire me to help them do.
I can also I have staff who can help with research and vetting of organization and yeah, I would say those are the 2 big, big picture things.
[Marvin]
Great, great.
Perfect. Perfect.
Alright well, thank you, everyone for participating in this 2-part webinar on magnifying your charitable gifts.
We're here to help as a resource in any way that we can certainly have lots of experience in this and hopefully we can assist you in the way that would be impactful for you.
So have a wonderful evening.
And if we don't chat directly in person, also have a wonderful holiday season as we enter the Christmas and holiday season here in December, all the very best everyone, take care.