We’re fortunate to live in communities where philanthropy is alive and well, much to the benefit of numerous organizations and agencies working toward the betterment of our quality of life.
The extent of that giving ranges, from the one-off donation of a few dollars to a fundraising campaign to the long-term commitment of major funds to an enduring need. Either way, such generosity adds up to serious money. According to the Fraser Institute, Canadians dug deep in 2019 to the tune of close to $10.3 billion. That’s not chump change.
From where he sits at Bobcaygeon-based McInroy and Associates Private Wealth Management, executive financial consultant Adam McInroy CFP, CLU is well aware that a fair number of both his longtime and prospective clients have made a habit of giving to organizations and causes near and dear to their heart for any one of a number of reasons.
“When you boil money down, there are only five true uses for it,” Adam says. “We can spend it — we all know how to do that. We can save it and invest it. We can pay taxes. We can use money to pay down our debt. We know those four uses pretty well. The fifth, and often overlooked use of money, is giving it.”
“It’s about the impact it can have. In our practice, it’s a conversation we have with our clients. Not all give to charities, but it’s something we want to approach with them. For some, that is where their heart is. They want to know their money will have an impact. One way to have an impact is through generosity.”
That generosity includes legacy giving. In explaining one motivation for people’s desire to provide for a favourite cause or charity after they’ve passed, Adam quotes Warren Buffett, who once said ‘I want to give my kids enough so that they could feel that they could do anything, but not so much that they could do nothing’.
“That quote is really impactful when you say ‘I have some assets. I have estate value. I want to pass it down but I don’t want to ruin the next generation. I want them to work and have some sweat equity building their own future.’,” Adam explains.
“To that end, one of the cool things we’re able to do is set up donor-advised funds for clients to give to charities after they’re gone. But what’s really cool is the impact. You have the one-dimensional impact of giving to charity from beyond the grave, but the secondary impact is on our children, grandchildren, nieces, and nephews who also have a connection and reminder of that legacy for years into the future.”
A donor-advised fund, says Adam, is an effective alternative to establishing a foundation.
“When we look through a client’s tax returns and say ‘Wow, you’ve really given a lot to this charity. Have you thought about what happens after you’ve passed away? They’re going to lose that revenue.’ With a donor-advised fund, you control where your funds go after you’ve passed on. It’s easy and clean for your estate, and you will know that whatever cause you’re giving to while you’re alive will continue to receive ongoing revenue after you’ve passed on.”
Adam notes that, in Ontario, after the first $200 of giving you’re only going to receive 29 per cent of that back as a charitable tax credit (unless you’re in the highest tax bracket at which point a 33 per cent tax credit may be available). That said, he points out there are ways to give that are tax friendly.
“You can take $1,000 from your bank account and give it to that charity and I think most people are familiar and comfortable with that strategy,” Adam says. “However, sometimes giving ‘in-kind’ can result in a great tax benefit. You could structure a $1,000 gift of securities — whether they are mutual funds, ETF, or individual stocks from a non-registered account — and have those assets go directly to the charity of your choosing.”
“The charity can then sell the $1,000 asset and get the cash but you, as the donor, don’t have to pay capital gains tax on that — and you get the full charitable tax donation slip to use against your income tax. It’s a win-win. It’s a bigger win for you to be giving in that manner because it’s an in-kind donation. You’re not getting the tax liability that would otherwise be created.”
When all is said and done, Adam notes estate planning — whether it involves legacy giving or not — is just plain smart.
“I kid with clients ‘You’ve got to love someone or something more than you love the CRA.’ Whether you want to give to a charity or not, if you don’t have an estate plan — which can be as simple as having a basic will in place — the government is going to take more than they otherwise would have. We’re just trying to be wise stewards of the resources that we have.”
Not everyone does, but for those who do want to provide for a charity or cause in their estate planning, Adam adds they can do so in a manner that makes it easy for their executor to understand.
“We were instrumental in a client and his wife setting up a foundation. They have both since passed away. The executor came to us, saying ‘I noticed this has been set up. What does this mean?’ We walked through what it means with the executor.”
For those who are thinking of legacy giving, Adam says they should consider two questions — the first being ‘Why that organization?’
“Organizations come and go. Passions come and go. If you want to give to an organization in perpetuity until your funds run out, that’s a long-time commitment. It’s very different than giving $20 today and $100 tomorrow. Generally, these are organizations that people have already been giving to for a long period of time, and they’ve seen the benefits of those organizations — the work that they’re doing, the impact that they’re having.”
“The other big question is what would stop you from giving to that organization? Sometimes the stewardship of organizations and how they handle finances change. Play devil’s advocate: what would happen if their mission or their stewardship of funds changed? How would that impact your view of that organization and your generosity that’s there today but might not be there in 10 years?”
The nice thing about donor-advised funds, says Adam, is “we can change the beneficiaries while you’re alive.”
On a more personal level, Adam says working with clients who want to leave something for their charities or causes of choice “is pretty inspiring” for Adam and his team.
“We don’t only think about the impact we can have for our clients, but also for the communities that we serve. Our team is very grateful to be part of the Bobcaygeon, Kawartha Lakes, and Haliburton communities. We want to give back. That’s one of the things we pride ourselves on. We don’t just want to just talk about that. We also want to demonstrate it, for our clients but also for our team.”
McInroy & Associates Private Wealth Management is located at 21 King Street West in Bobcaygeon. You can email Adam at email@example.com or call 705-748-1950. For more information about McInroy & Associates Private Wealth Management, visit www.mcinroypwm.com.
Investors Group Financial Services Inc.
This is a general source of information only. It is not intended to provide personalized tax, legal or investment advice, and is not intended as a solicitation to purchase securities. Adam McInroy is solely responsible for its content. For more information on this topic or any other financial matter, please contact McInroy & Associates Private Wealth Management.
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