This article was originally published on rbcwm.com
Being charitable can mean a number of things. For many people, it may be contributing your time through volunteering. For some, it’s supporting causes or organizations they care about via donations and financial means. How and why you give, and the level of emphasis you place on charitable activities, is something completely personal to you and your family.
Motivations for giving are often fueled by wanting to make a positive difference within your community or to give back, or a passion for a specific cause. Amidst the pandemic in particular and in seeing the direct impacts on the charitable sector, for some individuals, these motivations and emotions around charitable giving have grown and deepened. With this in mind, it can be helpful to look at the range of benefits a structured giving may offer as part of your wealth planning as a whole.
Charitable sector impacts during COVID-19
With charitable giving, there may be a tendency to focus on the immediate or short-term. Throughout the pandemic, and as a direct response to the effects of COVID-19 in communities and society, that tendency in some ways has intensified — many want to see their charitable dollars in action now so the impact is immediate. At the same time, there has also been a shift to a more focused approach and the longer-term benefits it may offer.
Getting started with structured giving
At the core of structured giving is developing a vision for what you want to achieve over time and mapping out when and how you will give. While charitable giving typically tends to be more reactive, a structured approach is more targeted and proactive. Many individuals often ask, “How can I have a greater impact?” and, more recently, “How can I extend my charitable impact over time?” In both cases, considering the different options for giving and carrying out planning introduces a range of potential advantages, tying in tax efficiencies and estate planning, and at the same time helping individuals make a more meaningful difference over the long term.
As a starting point, you or your family may want to spend some time thinking about and discussing values, causes or charitable organizations that resonate with you. Creating a list of charities or areas of interest that are close to your heart, and articulating what impact you’re looking to have with your charitable dollars, may also help in determining the framework for your strategy.
Other aspects to consider are how philanthropy fits into your personal or family circumstances, now, during your lifetime or as part of leaving a lasting legacy. Your family may also have ambitions for getting the next generation involved. From there, the next phase is determining the amounts and timing that best meet your charitable objectives and carrying out the appropriate planning with your qualified advisors to ensure these objectives are properly accounted for in your overall plans.
Identifying areas of charitable interest
As part of early conversations in developing your charitable strategy, and as you give thought to your areas of interest, it may be beneficial to take steps in getting to know certain charities and their programming. Doing so may help identify where you and your family can maximize your giving and accomplish your objectives by supporting a few focused charities. It can also broaden your sightlines to other charities that may be of interest.
For example, a family with strong charitable motivations has been helping with immediate pandemic needs by supporting a local food bank. Now they want to build more structure and purpose with their giving. In speaking with the food bank, they develop a better understanding of its longer-term goals, including advocacy for food insecurity, supporting newcomers and diverse populations, gender inequalities and youth malnutrition.
Learning about these additional areas may help the family develop a structured giving approach that focuses on this charity.
What are the different approaches to structured giving?
Depending on your goals, circumstances and timing, there are a number of options to consider, and which may offer efficient tax strategies. Here are some options for both during your lifetime or as part of wealth transfer and estate planning.
- Direct donation of cash
- Donation of non-cash gifts, including capital property, art and other collectibles, or even life insurance policies
- Donating publicly listed securities with accrued capital gains
- Charitable bequests in a Will
- Donations to scholarships and endowment funds
- Creating a private foundation
- Creating a charitable gift fund / donor-advised fund
Note: This list is non-exhaustive and includes only a selection of strategies and options which may offer potential tax efficiencies. A financial professional may assist in providing a more comprehensive model for donations. It is important to consult with your qualified tax professional. Furthermore, when considering a gift of securities, it is important to consult with the charity directly to determine whether they are able to accept this type of gift.
Determining the right charitable strategy for you
Keep in mind that your approach may evolve over time or as your priorities change. Charitable giving may become more of a priority as part of legacy planning. If that’s the case, you may want to consider lasting forms of giving and how they may fit with your wealth transfer or estate plans.
Legacy planning can incorporate philanthropy during your lifetime and leave a legacy through your estate while also creating tax efficiencies.
In looking at the big picture as it relates to your charitable intentions, keep in mind that the process and the approach will be unique to you and your family. Incorporating structure and strategies with your charitable giving can create benefits now, in the years to come and on a long-term basis for future generations.
This document has been prepared for use by the RBC Wealth Management member companies, RBC Dominion Securities Inc.*, RBC Phillips, Hager & North Investment Counsel Inc., RBC Global Asset Management Inc., Royal Trust Corporation of Canada and The Royal Trust Company (collectively, the “Companies”) and their affiliate, Royal Mutual Funds Inc. (RMFI). *Member – Canada Investor Protection Fund. Each of the Companies, RMFI and Royal Bank of Canada are separate corporate entities which are affiliates. “RBC advisor” refers to Private Bankers who are employees of Royal Bank of Canada and licenced representatives of RMFI, Investment Counsellors who are employees of RBC Phillips, Hager & North Investment Counsel Inc. and the private client division of RBC Global Asset Management Inc., Senior Trust Advisors and Trust Officers who are employees of The Royal Trust Company or Royal Trust Corporation of Canada, or Investment Advisors who are employees of RBC Dominion Securities Inc. In Quebec, financial planning services are provided by RMFI which is licenced as a financial services firm in that province. In the rest of Canada, financial planning services are available through RMFI, Royal Trust Corporation of Canada, The Royal Trust Company, or RBC Dominion Securities Inc. Estate and trust services are provided by Royal Trust Corporation of Canada and The Royal Trust Company. If specific products or services are not offered by one of the Companies, clients may request a referral to another RBC partner. The strategies, advice and technical content in this publication are provided for the general guidance and benefit of our clients, based on information believed to be accurate and complete, but neither the Companies, RMFI, nor Royal Bank of Canada, nor any of its affiliates nor any other person can guarantee accuracy or completeness. This publication is not intended as nor does it constitute tax or legal advice. Readers should consult a qualified legal, tax or other professional advisor when planning to implement a strategy. This will ensure that their individual circumstances have been considered properly and that action is taken on the latest available information. Interest rates, market conditions, tax rules, and other investment factors are subject to change. This information is not investment advice and should only be used in conjunction with a discussion with your RBC advisor. None of the Companies, RMFI, Royal Bank of Canada nor any of its affiliates nor any other person accepts any liability whatsoever for any direct or consequential loss arising from any use of this report or the information contained herein. In certain branch locations, one or more of the Companies may carry on business from premises shared with other Royal Bank of Canada affiliates. Notwithstanding this fact, each of the Companies is a separate business and personal information and confidential information relating to client accounts can only be disclosed to other RBC affiliates if required to service your needs, by law or with your consent. Under the RBC Code of Conduct, RBC Privacy Principles and RBC Conflict of Interest Policy confidential information may not be shared between RBC affiliates without a valid reason.
This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.
