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Donating Through Charitable Foundations

Badger Investment Group - Nov 09, 2021
Charitable giving is a haphazard business for most of us. There are almost 86,000 registered charities in Canada. We are well aware of the need to support many of these worthwhile endeavours, which often go where civic projects or governments cannot.
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Charitable giving is a haphazard business for most of us. There are almost 86,000 registered charities in Canada. We are well aware of the need to support many of these worthwhile endeavours, which often go where civic projects or governments cannot. We also know about the tax benefits of donating, including the exemption on capital gains for donated securities.

However, the process of donating is often an impulsive gesture without much thought. As a result, many of us have a vague sense of unease that this is not the best way to donate each year. Many people also wonder if charities should be included in their estate plans, and if so, how best this should be accomplished.

THE EXAMPLE OF WARREN BUFFETT

Warren Buffett, respected investor and one of the world’s most wealthy individuals, has decided what he wants to do. The bulk of his Berkshire Hathaway holdings will gradually be given away to various charitable foundations, including the Bill and Melinda Gates Foundation. The transfer of funds is gradually taking place before his death, not as a result of his passing.

What about his family? After all, he has said in the past: “A very rich person should leave his kids enough to do anything but not enough to do nothing”. Is he a scrooge for not passing on most of his wealth to his children? Not in the least. Each of his children heads up charitable foundations of their own, and those organizations will each receive billions of Berkshire Hathaway shares, and Buffett has always maintained that his children have always been well looked after.

“Many people also wonder if charities should be included in their estate plans, and if so, how  best this should be accomplished”

WE CAN DO THE SAME

It comes as a surprise to many clients that, on a smaller scale, they can do the same with their assets. If the goal is to bring order and efficiency to a charitable donation program or to answer an estate need, a foundation might be considered.
Not everyone should set up their own individual charitable foundation, of course. There are considerable costs involved in establishing a trust, plus significant operating expenses beyond that. Such private trusts may make sense only for those who contemplate multimillion-dollar donations of capital.


But, as with Buffett, the assets of a number of individuals can be pooled and administered together to achieve much the same results. This arrangement can cut costs and still give donors tax benefits and the flexibility to direct donations to their favourite causes. Perhaps surprisingly, such pooled arrangements are frequently used by some of the wealthiest families in Canada.
In many cities, community foundations have been established to channel donations to areas of community need. Bequests of all sizes will be welcomed, and most donors will retain the right to direct annual distributions to their favourite local causes. Many financial institutions have established arrangements to assist in this process with donor-advised accounts. These can be another convenient way to set up an effective process of charitable donations, with an ongoing say in how bequests are distributed.

CANACCORD GENUITY WEALTH MANAGEMENT IS A DIVISION OF CANACCORD GENUITY CORP., MEMBER-CANADIAN INVESTOR PROTECTION FUND AND THE INVESTMENT INDUSTRY REGULATORY ORGANIZATION OF CANADA This document is for general information only, not intended to provide tax, legal or financial advice, and under no circumstances should be interpreted as a solicitation to act as a securities broker or dealer in any jurisdiction. All views are intended for general circulation only and do not have any regard to the specific investment objectives, financial situation or general needs of any particular person, organization or institution. All investors should consult with a qualified investment advisor or tax professional before making any investment decisions. Tax & Estate advice offered through Canaccord Genuity Wealth and Estate Planning Services.