When I was a financial consultant, particularly after the company began more proactively to offer options via insurance or investments to clients who might be interested, I selectively discussed the idea of philanthropic planning.
Those with an existing inclination to charitable giving were the b
est candidates for looking into this as a legacy. Alas, in neither my nor for the most part colleagues’ experience, the marketplace resistance was stronger than expected.
That said, as the November issue of The Insurance & Investment Journal reminds, there are financially successful Canadians prepared to consider such plans.
Part of the problem, according to a study on the subject, is that the vast majority of advisors are reticent about raising the subject. The reasons cited include perceived lack of expertise, concern about lost AUM (assets under management), and reluctance to bring up the issue. At the risk of sounding somewhat altruistic, or certainly less self-focused, in my experience it was more the first and third of those challenges at play. More training and effort in addressing these latter points could be practiced by many advisors.
Presumably some advisors remain unaware of the incentives given by the Income Tax Act. For example, up to 75% of yearly income can be donated and eligible for tax credit. In the year of death, up to 100% of yearly net income can be claimed on a terminal return; contributions in excess of this threshold can be carried back to the previous year. Moreover, almost ten years ago capital gains tax on publicly traded securities donated to registered Canadian charities was eliminated, the giver receiving receipt for the securities’ fair market value. Starting in 2016 new rules will provide even more flexibility.
Since 2006 the process has been enhanced by the introduction of ‘donor-advised funds’, wherein foundation accounts effectively are established. These have many of the advantages of private charitable foundations, without the administrative headaches and high expense. Insurance planning can also play a part, in that the ownership of a whole life policy (with its structure of accumulating cash value) can be assigned to a client’s foundation account.
Naturally, as objectively desirable as such programs are, it must be established that the client’s situation is suitable; sometimes even high net worth individuals have high debts, or perhaps a commitment to one or more family members facing disabilities.
Where circumstances are right, a family legacy of philanthropic planning can take shape. This spirit of giving can infuse a positive, long-term lesson for multi-generational family members involved.