By Elli Schochet, CFP and Sarah Brown, FEA
For many of our clients, charitable giving is an extension of their values and a practical way to contribute to the world around them. Some give during their lifetime, some plan to give through their estate, and others involve their children in charitable decisions so that the next generation learns the importance of contributing to the community. Regardless of how clients define charitable giving, our firm’s role is to help them structure their gifting arrangements in a way that aligns with their values and is effective within their overall plan.
Clients approach charitable giving in different ways at various stages of life, and we typically observe several distinct patterns. Clients in their 80s who grew up in a period shaped by responsibility, rebuilding and community, and their giving reflects a focus on supporting society rather than tax strategy. Clients in their mid-60s who want to include charitable giving in their wills, looking for structures that maximize the financial benefit to the causes they care about. Clients in their mid-30s who want to feel connected to their impact, exploring donor-advised funds that allow ongoing involvement, flexibility and direction.
Discussing charitable goals is a natural part of understanding a client’s broader financial life. We take the time to understand what matters to them now and in the years ahead. This allows us to consider the complete financial picture and use the planning tools that best support their charitable intent, whether appreciated securities, flow-through shares, donor-advised funds, philanthropic foundations, or insurance. Each tool has strengths, and none is right for everyone. Our role is to help clients compare options so they can choose the structure that best suits their goals.
Families who want flexibility in how they give can consider options that allow contributions to be made during their lifetime, structured for the future, or designed to support multiple causes.
One approach is a donor-advised fund. This structure enables donors to contribute assets, receive an immediate tax receipt, and recommend grants to any qualified Canadian charity without having to manage administrative requirements themselves. Individuals can establish donor-advised funds at various contribution levels and can be endowed or structured as flexible charitable funds. Some allow younger adults to begin giving at modest amounts, supporting early engagement in philanthropy. They can also include succession planning features, enabling children or other family members to recommend grants in the future.
Contributions to donor-advised funds of any type may be made using a range of assets, such as cash, securities, insurance, charitable bequests, RRSPs, TFSAs or RRIFs, providing flexibility in how charitable planning is integrated into an overall financial strategy.
For clients who support a charity regularly and want to leave a future gift, life insurance offers an additional way to structure a charitable donation in advance. Depending on how the client wants the gift to flow and where the tax benefit is most valuable, there are several options:
- The charity is the owner and the beneficiary. The client pays the annual premiums and receives a tax receipt each year.
- The client is the owner, and the charity is the beneficiary. The estate receives the tax receipt upon the individual’s death.
- The client is the owner, and the estate is the beneficiary. The estate is instructed to make the gift, and the estate receives the tax receipt.
The question is whether the tax receipt and the corresponding tax savings are more useful during the client’s lifetime or for the estate later. The answer varies by family, so it is essential to understand how each structure works within a broader plan.
How families approach charitable giving varies widely, and the following examples show how different structures can support different goals at various stages of life. Each reflects a distinct situation, reinforcing that there is no single approach that works for everyone.
Case Study 1:
An Al G. Brown & Associates client in his 60s planned to leave a gift of one million dollars to charity in his will. After reviewing his overall plan, we found that a joint last-to-die policy could achieve the same charitable result for the charity while costing the client less in premium payments. The client purchased a policy with himself as the owner and named the charity as the beneficiary. The charity will receive the funds on the death of the second spouse, and their estate will receive a tax receipt. This means the client can fulfil his charitable intention without impacting the inheritance he plans to leave to his family and saving the estate taxes.
Case Study 2:
A young woman with a young family wanted to start giving to charity in a structured way. Al G. Brown & Associates helped her choose an insurance policy that required an annual premium of approximately $1,500 for 20 years. Once the premiums were complete, the policy would remain in place without further payments. Upon the death of the second spouse, the charity will receive $125,000. Each year during her lifetime, she gets a tax receipt, giving her a manageable way to build a meaningful future gift.
Case Study 3:
A family wanted a charitable approach that allowed them to give during their lifetime, involve their children and create a plan that could evolve over time. Al G. Brown & Associates, in collaboration with the family’s other financial advisers, helped them to establish a donor-advised arrangement, funded with a combination of cash and securities. This allowed them to make contributions when it made sense, receive tax receipts immediately and recommend grants to different charities over the years. They named their children as successor advisors so the next generation could continue directing the charitable support in the future.
Regardless of the financial structure chosen, a clear framework governing a family’s charitable giving can help families make consistent decisions. A simple charter outlining their values, priorities, and criteria for giving can sometimes be enough. This approach also works in a business context. For example, our firm has a charitable charter that guides us on where we donate, what criteria we use to evaluate requests and how we ensure our giving reflects our values. It helps us stay consistent when we are approached for support and provides a structure for decisions that may need to be revisited over time. It reflects the importance we place on giving back and the understanding that charitable giving is part of personal, community and corporate responsibility.
Time and again, Al. G. Brown & Associates has witnessed the impact of long-term planning. We have delivered cheques to charities today, which are the result of policies set up decades ago. Each time we see a gift reach a charity that someone cared about years earlier, it reinforces the value of thoughtful planning. Earlier generations helped rebuild communities and supported immigrants as they found their place in Canada. Today, many clients continue that tradition through structured giving and planned contributions.
Charitable giving is most effective when it aligns with a client’s values, goals, and life stage. There are many ways to give and many structures that can support those decisions. The right choice depends on the individual or family. Our role is to help clients understand the options so they can choose the approach that fits their plan and expresses what matters most to them. Click here to arrange an appointment to discuss financial planning.
Frequent Questions
Is a tax receipt and the corresponding tax savings more useful during a person’s lifetime or for the estate later?
The answer varies by family, so it is essential to understand how each structure works within a broader plan. How families approach charitable giving varies widely. Different structures can support different goals at various stages of life. Each reflects a distinct situation, reinforcing that there is no single approach that works for everyone.
True or False: Discussing charitable goals is part of understanding a client’s broader financial life.
True. Understanding a client’s charitable goals allows us to consider the complete financial picture and use the planning tools that best support their charitable intent, whether appreciated securities, flow-through shares, donor-advised funds, philanthropic foundations, or insurance. Each tool has strengths, and none is right for everyone. Our role is to help clients compare options so they can choose the structure that best suits their goals.
For people who support a charity regularly and want to leave a future gift, does life insurance offer an additional way to structure a charitable donation in advance?
Depending on how you want the gift to flow and where the tax benefit is most valuable, there are several options: 1) The charity is the owner and the beneficiary. 2) You are the owner, and the charity is the beneficiary. 3) You are the owner, and the estate is the beneficiary. A Certified Financial Planner can help you understand which option is best for you within the context of your broader plan.
