In our latest episode of Conversations on Wealth, host Sarah Widmeyer, SVP, Head of Wealth Strategies talks philanthropy and the importance of strategic giving with Sylvia Azoulay, VP, Tax & Estate Planning.
We talk about:
- Getting started on a personal or family giving strategy
- How donating a life insurance policy works
- The difference between donor advised funds and private foundations
Sarah Widmeyer 0:16
Welcome to Conversations on Wealth, a podcast dedicated to helping Canadians navigate the complexities of wealth with a multi-dimensional approach to planning and wealth management. I’m Sarah Widmeyer, Senior Vice President and Head of Wealth Strategies at Richardson Wealth, and today we’re talking about charitable giving. How and why you give, and what charities you choose to support is really a very personal decision. And it speaks to the values that are important to you and your family. Not only that, but research has actually shown that giving makes us far happier than receiving, it just feels good to give. But you may be wondering if there are ways to have a greater impact and maximize your tax efficiency. And here to talk about that is Sylvia Azoulay–Vice President, Tax and Estate Planning here at Richardson Wealth. Sylvia is an estate planning lawyer, and she’s very well versed in many different aspects of charitable planning. Sylvia, I’m so pleased to have you with us today to talk about this really important topic. Welcome.
Sylvia Azoulay 1:23
Thank you, Sarah. It’s a pleasure to be here.
Sarah Widmeyer 1:26
These aren’t easy times for Canadians, and of course, we’re dealing with the after effects of the pandemic still. Sylvia, what are you noticing about the charitable landscape in Canada? Who is giving from a demographic perspective? And where are you seeing the greatest need?
Sylvia Azoulay 1:46
Sarah, you’re absolutely right about it being hard times, both for Canadians, and for the charities. Charities are in great need. They’ve had a very hard time through the pandemic. And they’re in need on two fronts. They’re in need on the financial front, many charities are on the brink of not being able to operate, and they’re in need of volunteers, of people to contribute their time. So that’s what’s happening on the landscape side for charities is that high need. And on the demographic side of who’s giving, we have people who are usually in the older age bracket who have been longtime donors to charities, and who are actually giving more. So their dollars are increasing. But generally, other than that demographic, Canadians are giving less, understandably, because of economic issues and the pandemic. But that’s generally what’s been happening. So overall charities are doing okay in terms of still getting money from the same people. But we’re not encompassing all of the Canadian demographic.
Sarah Widmeyer 3:05
And maybe the next generations of Canadians.
Sylvia Azoulay 3:07
Sarah Widmeyer 3:09
Well, I know in–in a little bit, we’re going to talk about families and how to bring the family into the discussion, which is probably a really important element to charitable giving in Canada, something we need to focus on. But for now, I do want to talk about, you know, we often give reactively, as opposed to strategically. And I think there are ways that we can be very focused in the way that we give. And I wondered if you could talk about that for a moment.
Sylvia Azoulay 3:41
Reactive giving is probably the most common way to give. There’s a few ways that we give as donors. One is that we respond to our friends and family who are fundraising and they’re asking for money from their friends and family for a particular cause that they’re working on, so maybe they’re going to run a marathon, and they’re getting sponsors or a walkathon or that and they’re getting their family and friends to help contribute. And that’s fantastic. The other way that we give, I would say somewhat reactively is that we are responding to the solicitations of the charities that we like and every year we tend to give to the institutions and the charities that we normally give to, so certain hospitals or churches, or health causes aren’t your other religious organizations that we support. And we sort of annually just keep giving to the same ones. But strategic giving is very different than that. It’s being proactive about thinking about the methods if you’re using the tax incentives and advantages and ways you can leverage your giving and narrowing down the causes that you want to support. Many people spread themselves thin and they support a very wide array of causes with smaller amounts to each cause. And strategically, you might have a better impact if you really think through the categories of causes you want to support and then narrow it down so that you can have a bigger impact. That would be more strategic giving, in addition to giving your time, your talent and your treasures–sorry, your time, your talent and your network of people.
Sarah Widmeyer 5:32
So I want to talk for a moment about the word philanthropy. A lot of people associate the word philanthropy with the ultra-rich. And in fact, you know, the last couple of comments that you’ve made, talked about people that have been blessed and have worked hard to create wealth. But yet, philanthropy is really something that we all can do. And we talked about the gift of time. So for the people listening that don’t feel that they have that kind of excess money, and I can’t really, you know, there might be thinking I really can’t make a difference without, with my giving, because it’s, it’s smaller, incremental amounts. That’s really not true, is it? And there are other ways to give and be strategic about it. Can you talk about that for a moment?
Sylvia Azoulay 6:19
Sure. And you’re absolutely right, the word philanthropy, I wish we could come up with more words, and there are more words, and philanthropy does have connotations for many people around being ultra wealthy. So I think we need to change the terminology for people. And think about it as giving back or fulfilling your passions or something
Sarah Widmeyer 6:42
Sylvia Azoulay 6:42
Sarah Widmeyer 6:42
Yeah, like that.
Sylvia Azoulay 6:44
The approach people can take is to not think of it only in dollars, as we talked about, so thinking of your time and your talent and your network, but also, how do I make these dollars that I do have the most impact, it’s really about impact. It’s not always about the volume of what you’re giving, the amount of what you’re giving, it’s the impact you’re having. And so it’s more about looking at the cause working with the charity to see what their needs are, and letting the charity help you understand what they need, as opposed to you dictating, I want these dollars used for X purpose. So it’s really having a collaborative approach to have your impact.
Sarah Widmeyer 7:32
Yeah, I like that, too. I’ll tell you personally, my girls and I would sit down every year around Christmas time, and we would talk about “how can we make an impact at this year? And how do we want to support different areas in our community?” And the point I’m getting to is philanthropy or giving back or having an impact, I think starts young. And I think it’s something that you ingrain as a–as the thing that we do. And you know, we would go to Costco and load up on diapers and wipes and formula, and drop it off at a local women’s shelter. And the point that I’m trying to make is, again, it’s not a tremendous amount of money. I mean, it wasn’t insignificant, but it was something that the kids could get involved with and feel good about. And that was something that we would do annually. And as a result, you know, today my kids are very focused on giving back and, and supporting CAM-H, and other, you know, community charities and things that are important to them. And so, those are my personal stories, but I think, you know, you’ve done so much work with families, what are some of the other ways of getting the next generation involved in–in the concept of giving back?
Sylvia Azoulay 8:48
Yes, the examples you gave are excellent and I think lots of families do try to do that. And it’s a really great thing to instill the idea of finding ways to help and they don’t have to be just writing a check. So that participation, or that going out, we did similar things with our kids, and we bought toys for a particular charity, and-and they love that it’s–it’s fun to give, and they can relate to it, because it’s, it’s something that they enjoy. So those kinds of things are really, really fantastic ways to get your children involved. As your children get older, it’s also about talking about it more too, it’s the doing (which) is fantastic. It’s also thinking about what are the differences we want to make as a family? What’s our legacy?
Sarah Widmeyer 9:36
Sylvia Azoulay 9:36
As a family, what were what are we what do we want to be known for? And I don’t mean in a famous way,
Sarah Widmeyer 9:42
Sylvia Azoulay 9:42
But what is it that we do as a family? And how do we want to impact our community? And how do we want to use what we have? So another example that pops in my mind is, you might be talking to a charity, it might be one of your grassroots charities in your community. They might want to put on event–an event. And you might have a great network, you might have a friend of yours, who’s a caterer, yeah, and that you found them a connection, and that caterer might want to do something charitable or at a very low cost for the charity, and you’ve now impacted that in that way. So there’s lots of different things you can do to have an impact and to help out.
Sarah Widmeyer 10:27
So the concept of legacy, it kind of gets me into the next topic of estate planning. So there are ways and means that we can give as a last gift, something that we can plan for in our Estate Planning, I wondered if you could talk about that for a moment.
Sylvia Azoulay 10:46
Absolutely, you can set out in your will, an amount from your estate that can be donated to either a charity, or you can create your own charitable vehicle while you’re alive so you can create your own private foundation or you can create a donor advised fund, and in your will, you can have a portion of your estate or a dollar amount indicated in your will that will go to particular charities or it will go to your private foundation that you created while you were alive, or your donor advised fund that you created. So you absolutely can do that, and there are tax benefits as well. When you donate either during your lifetime or in your estate, you will have a tax credit that hopefully can be utilized to offset tax that you’re incurring and then you can get that extra benefit. So in fact, your cost of giving is actually lower. One of the things people are concerned about is if they donate to charity from their estate, it might take away too much from their heirs. But if you understand the tax incentive and the cost of giving, it lessens that problem in your mind.
Sarah Widmeyer 12:04
I also know that families and individuals sometimes choose life insurance as a way of donating. Can you talk about that for a moment?
Sylvia Azoulay 12:11
Absolutely. Life insurance is a wonderful opportunity to leverage your giving to give more by using a life insurance policy that will be donated to the charity, or the proceeds will be donated to the charity. There are a couple of different methods of doing that. If you have a policy right now, and it’s something you probably don’t need anymore. It was bought many years ago, I’m talking more about a permanent policy, not a term policy. You’ve bought it many years ago, it was for financial security of your family, but everybody’s okay. And you’re older, you might think “I want to get rid of that policy. But you should stop and think maybe I should keep that policy, and now designate the charity to receive the life insurance proceeds. And I’ll continue to pay those premiums, because I know the charity is going to get the proceeds. You could potentially donate the policy itself so the charity will own the policy. And you will continue to pay the premiums every year, you will give the charity the premium, and you will get a tax receipt for that premium. Oh, isn’t that awesome? And then the charity will get the proceeds, ultimately. So it’s an excellent opportunity. And there are even new innovative products coming out that allow you to pay those premiums in an accelerated fashion, maybe a one pay, you pay a one premium, the donor pays one premium for the policy. And the charity owns the policy, the insurance company gets their one premium.
Sarah Widmeyer 13:54
Sylvia Azoulay 13:55
You get a charitable deduction for that premium.
Sarah Widmeyer 13:58
Sylvia Azoulay 13:59
And now it’s set. It’s already done, rather than you have to pay year after year after year. So that’s out there now too
Sarah Widmeyer 14:04
Wow. So many great ways of–of doing more, if that’s something that you want to do, and I would assume if you’re listening to this podcast, then you are interested in ways of giving back which is um, it’s so important and I think it’s part of what makes us human. S–so you mentioned donor advised funds, and I think that that is something maybe we should spend a few moments talking about. Also private foundations. What is the difference between those two? One sounds very exclusive, the private foundation sounds kind of exclusive and maybe for someone with more treasure to give. But tell us about both and what are the differences if you would?
Sylvia Azoulay 14:49
Yes Sarah, you’re right about the private foundation–that requires a lot more funding to really make it worthwhile to create your own private foundation. What you would do to create your own private foundation is you would incorporate a not for profit corporation, and then you would apply to the CRA to get charitable status for your not for profit. And it’s a process and it costs um, a fair amount to get that set up, because you need lawyers to help you incorporate and to help you submit your application to CRA to become charitably registered. And so you probably don’t want to do that unless you’re really ready to contribute several million to your private foundation, to be honest, that’s, that’s where it sort of stands in terms of how much you ought to be giving if you really want to do that.
Sarah Widmeyer 15:40
Sylvia Azoulay 15:40
And the other motivation is that you actually want to run that. It’s–it’s sort of a corporation, you’ve created a foundation–you’ve created, and you want to be very actively controlling that and doing and you have a lot of administrative and compliance to do with that.
Sarah Widmeyer 15:53
Sylvia Azoulay 15:54
So that’s not practical for a lot of people. No, it’s not doable. So the donor advised fund is a wonderful alternative. It is an investment, looking at as an investment type of account that you can open at an existing charitable foundation. Many public foundations offer that opportunity to create your own sort of mini foundation on their platform. They’re already registered as a charity. They already do all that administrative work and that compliance work. So you get to sit on their platform with your family fund.
Sarah Widmeyer 16:19
Sylvia Azoulay 16:33
And it’s all kind of done for you. So it’s a much easier vehicle.
Sarah Widmeyer 16:39
And this is something at Richardson Wealth we provide our clients with access to…
Sylvia Azoulay 16:44
That’s right, we use uh-Benefaction Foundation, too, they are the registered charity, and they will help administer the funds that our clients want to open up as the charitable fund.
Sarah Widmeyer 17:00
So before we wrap up, Sylvia, any last thoughts that you’d like to share?
Sylvia Azoulay 17:17
Well, I think we need people to want to learn more. And there’s so much to learn about different methods of giving and different methods of having an impact. There are lots of different incentives out there to help people give. The government has put great tax incentives in–one of those is to realize that you can donate rather than cash, you can donate securities from your portfolio. And if you do that, the capital gain on those securities is eliminated. So you’ve now eliminated some capital gains tax you would have otherwise paid if you were selling those shares. There are matching programs, other people out there who will match your dollars. So there are opportunities for that too. You can donate art, you can donate land, you can donate insurance policies, there are a lot of different techniques, and I think what’s important is for people to seek out some professional advice. Um, certainly we offer that, and also, you can talk to your tax accountant, you can talk to community foundations, they have lots of resources, and there are lots of things online. There are lots of possibilities and ways to fulfill your passion as someone who wants to give back.
Sarah Widmeyer 18:38
Thank you. Thank you. I’d like to thank Sylvia Azoulay, for joining us today and for sharing her expertise on the impact of giving. This conversation has really reminded me and I think all of us to never underestimate the impact we all can have on the causes that are important to us. It’s not about being wealthy and having millions to give. It’s about being strategic with our giving plan and really finding ways, we talked about the gift of time to make a meaningful difference. If you’d like more information on how to set up a charitable gifting plan, please reach out to us. We’re here to help. Conversations on Wealth is available wherever you get your podcasts. Remember to follow us on LinkedIn, Twitter or Facebook for the latest on wealth strategies. Thank you all for listening. And join me again next time.