This week I will be presenting at Wink Calgary . This is a lunch-time session where I walk a woman named Jane through her legacy planning and charitable gift strategies. As I was thinking about how best to present the information in a condensed amount of time, and still provide enough information for individuals to be able to start the work on their own, or seek out additional resources as needed, I reflected on what my parents and grandparents have taught me.
My mom, Linda, is a pretty special lady. She raised three daughters alongside my dad, Isaac, all of whom are fiercely independent and successful in their own right. If I were to sit down and help her plan out her charitable gifting strategy and what her legacy looks like for her, these are some of the questions I would ask:
- What do you think the most meaningful gift you have given your daughters?
- How do you see your values reflected back to you by your children? Your husband?
- What does legacy mean to you?
- What is the best way for you to feel engaged with community and the organizations you support?
In my role as a philanthropic advisor, I don't help an individual figure out how much they have to set aside for their social capital (includes time, talent and treasures) and philanthropy. This amount is determined by the tax planners/financial advisors or other financial/legal experts in their circle. I am typically called in when this conversation has happened or is in the beginning stages of occurring so that we can have the best picture laid out for execution.
In the case of the upcoming WINK event, Jane has $250,000 to set aside for social capital purposes. This is a number that has been steadily growing and she is now deciding how best to apply these funds. Things to consider in this situation, is not just how much is being set aside, but in what format (cash, securities, insurance) and in which type of vehicle (Donor Advised Fund, Private Foundation, regular chequing account). Also to consider is if she wants any responsibility for managing the donations passed on to her daughter Rosie. This chart  outlines some of the things to consider when deciding the type of funding vehicle to set up for your philanthropy and social capital.
Throughout this post I have separated social capital from philanthropy. I do this purposefully. Social capital MAY include philanthropy, but it doesn't have to. It can also include investments in patient capital projects (i.e. social enterprises that have a lower or slower return on their cash investment), it might include investments in non-profit organizations that are not charitable in nature, but are doing interesting things, and it can also include one-off donations or POP-UPs for things like emergency funds for someone who lost their home in a fire or flood. Social capital uses profit to drive social change and build upon itself. It is seen as an investment tool (equity, convertible debt or low-interest debt) and it is also seen as something that allows the one's own foundation or philanthropy funds to grow.
In Jane's case, due to the amount that she is thinking about setting aside for her social capital fund, we are going to look at different Donor Advised Fund models and her disbursement calendar over the next 10 years. The beauty of donor advised funds, is that all the assets in everyone's fund is pooled together so the minimum legal requirement of 3.5% is spread out across everyone thereby ensuring that if you don't disburse your quota within the year, you have grace because the funds have been aggregated. This allows people to set up their fund and plan accordingly. The other nice thing about DAF's is that all the legal leg work is done by the firm that manages the DAF so the time and effort to manage the fund is taken off the shoulders of the individual or family.
Of course, DAF's aren't for everyone. If you want to manage your own assets, or have $1Million+ to set aside, then opening up a private or public foundation might be more up your alley. Of course, with more "freedom" comes more responsibility. Reporting, legal, accounting, granting, etc. fall squarely on the board and/or trustees of the foundation. This can sometimes seem burdensome, especially if the Next Generation isn't all that interested in taking on the philanthropic mantel.
Regardless of the funding vehicle that you choose, here are some other things to consider:
- Do you want to give in the US or Canada? In either case, you can only use the tax receipt against the income that you generate in that country.
- Do you want to donate non-cash items (i.e. Art work)? The organization that you want to leave these items to needs to be brought into the conversation early enough as in some cases Heritage Canada or the equivalent in the US will need to be engaged in the process.
- Do you want keep the funding mechanism alive after you have passed away? What is the succession plan of the fund? Have you discussed this with your next of kin?
- Do you have any insurance that you have set aside for charities? Depending on the type of insurance, your monthly premiums may have been tax deductible. Not all policies can be used for charitable purposes and not all charities are set up to accept donations of insurance. Having clear instructions and a relationship with the charity in advance can help smooth out this process.
- What happens if the charities you have identified close down? Do you have a plan in place for selecting new ones or disbursing the remaining funds out to other qualified donees?
Gena is the CEO & Founder of Dexterity Ventures Inc. You can follow her on twitter at @DexterityCon .