How reflecting on your charitable values and incorporating the right planning can help you make a more meaningful impact over time.
Being charitable can mean a number of things. For many Canadians, it’s supporting causes or organizations you care about via donations and financial means. For some, it may be contributing your time through volunteering. How and why you give, and the level of emphasis you place on charitable activities, is something completely personal to you or your family.
Motivations for giving are often fueled by wanting to make a positive difference within your community or to give back, or a passion for a specific cause. Amidst the pandemic in particular and in seeing the direct impacts on the charitable sector, for some individuals, these motivations and emotions around charitable giving have grown and deepened. With this in mind and for those who may want to create a more significant charitable impact, it’s important to look at the range of benefits that a structured approach can offer as part of your wealth planning as a whole.
Over the course of the pandemic, the charitable sector in Canada has been significantly impacted, from decreased donations to growing service demands. According to Imagine Canada’s second Sector Monitor Study in February 2021, 75 percent of charities noted a drop in at least one type of donation, and over half have experienced lower revenues since the onset of the pandemic, with an average decline of 43 percent.¹
Furthermore, 46 percent are reporting increased demand, creating a growing gap between service needs and capacity to support, and concerns among many charities about long-term viability.²
While statistics do seem to indicate that many Canadians gave less overall to charities in 2020, and that charitable giving has been down in recent years and as a result of COVID-19,³ for some, these times have instead encouraged a stronger mentality to help and a greater motivation to set a strategy.
In general with charitable giving, there can often be a tendency to focus on the immediate or short-term. Throughout the pandemic, and as a direct response to the effects of COVID-19 in communities and society, that tendency in some ways has intensified — many want to see their charitable dollars in action now so the impact is immediate. At the same time, for many individuals and families who have charitable motivations and available resources, there’s also been a shift to a more focused approach and the longer-term benefits it may offer.
At the core of structured giving is developing a vision for what you want to achieve over time and mapping out when and how you will give. While charitable giving typically tends to be more reactive, a structured approach is more targeted and proactive. Many individuals often ask, “How can I have a greater impact?” and, more recently, “How can I extend my charitable impact over time?” In both cases, considering the different options for giving and carrying out planning introduces a range of potential advantages, tying in tax efficiencies and estate planning, and at the same time helping individuals make a more meaningful difference over the long-term.
As a starting point, you or your family may want to spend some time thinking about and discussing values, causes or charitable organizations that resonate with you. Creating a list of charities or areas of interest that are close to your heart, and articulating what impact you’re looking to have with your charitable dollars, may also help in determining the framework for your strategy.
Other aspects to consider are how philanthropy fits into your personal or family circumstances, now, during your lifetime or as part of leaving a lasting legacy. Your family may also have ambitions for getting the next generation involved. From there, the next phase is determining the amounts and timing that best meet your charitable objectives and carrying out the appropriate planning with your qualified advisors to ensure these objectives are properly accounted for in your overall plans.
As part of early conversations in developing your charitable strategy, and as you give thought to your areas of interest, it may be beneficial to take steps in getting to know certain charities and their programming. Doing so may help identify where you and your family can maximize your giving and accomplish your objectives by supporting a few focused charities. It can also broaden your sightlines to other charities that may be of interest.
Say a family has recently focused on immediate pandemic needs, so they’ve been supporting their local food bank. They have strong charitable motivations and now want to build more structure and purpose with their giving. In speaking with the charity and developing a better understanding of its programming, this family learns that further to having the capacity to address immediate needs like the pandemic and short-term food insecurity, the food bank’s areas of focus also include longer-term advocacy for food insecurity, supporting newcomers and diverse cultural populations, gender inequalities and youth malnutrition.
In learning these additional focus areas, this may help the family recognize that their impact can be greater than they thought, and that they can accomplish additional charitable goals via a structured giving approach that focuses on this charity of choice or charitable sector areas of focus.
Depending on your goals, circumstances and time horizons for giving, there are a number of options that may be suitable and that may offer immediate or long-term tax benefits while at the same time fulfilling your charitable intentions. The following list highlights options for both during your lifetime or as part of wealth transfer and estate planning.
Note: This list is non-exhaustive and includes only a selection of strategies and options that may offer potential tax advantages. A financial plan may assist in providing a more comprehensive model for donations. It is crucial to consult with your qualified tax advisor to ensure your individual circumstances are properly considered and addressed and that options are best suited to your needs and goals. Furthermore, when considering a gift of securities, it is important to consult with the charity directly to determine whether they are able to accept this type of gift.
As you and your family reflect on and consider your charitable objectives and goals, part of the decision-making process will include how, how much and how frequently to make charitable gifts or contributions/grant disbursements if you’re using a foundation. This is where tax, financial and estate planning also need to be considered, as philanthropic strategies may be implemented as part of or alongside these other areas of planning.
Also keep in mind that your approach can shift and evolve over time or as your situation changes. Much like any charity you choose to support is a very personal decision, that decision itself or the amount of support may adjust as your goals or priorities change. For example, some may be more interested in seeing their charitable impact now, or may want to start with a smaller amount today to donate to charity or into a foundation for annual or lifetime granting. At a later point, charitable giving may become more of a focus or priority in your life or as part of legacy planning. If that’s the case, you may then want to consider lasting forms of giving or how it may fit in with your wealth transfer or estate plans.
This program is specifically designed for individuals and families who want to support charitable causes in a meaningful way, without the time and costs associated with establishing a private foundation. The RBC CGP provides an efficient way to give during your lifetime and/or from your estate that combines immediate tax benefits with the flexibility to support your favourite charities over time and across generations.
Through this program, you can make initial and ongoing contributions to a charitable gift fund, which is administered by Charitable Gift Funds Canada Foundation. With your RBC advisor, you determine the timing of contributions, which asset, and how much to contribute over time, in alignment with your financial plans, and the funds remain invested with your trusted advisor.
In the context of more recent times, a hybrid approach to giving has been a growing strategy among some individuals and families. This type of approach incorporates philanthropy during one’s lifetime and through an estate. With this method, individuals are able to see the benefits of their charitable impact now and during their lifetimes, and at the same time create a longer-term legacy for years after their eventual passing. A blended strategy can also create tax efficiencies over the course of life and as part of one’s estate. For those who choose to engage family members as part of this approach, this may also be beneficial in building and extending charitable values across generations.
For more information on planning your charitable legacy, please read the Perspectives 2020 article: “What does your charitable legacy look like?”
In looking at the big picture as it relates to your charitable intentions, keep in mind that the process and the approach will be unique to you and your family. Whether you’re a younger individual, you have a busy career or growing family, or you’re approaching or already enjoying retirement, incorporating structure and strategies with your charitable giving can create benefits now, in the years to come and on a lasting basis for future generations.
Regardless of the amount being given (or granted from a foundation or donor-advised fund) annually, cumulatively in life or via one’s estate, if a more focused approach aligns with your charitable goals, it’s important to carefully consider your objectives, specifically and holistically. Think about how you’re currently giving, and how much in total you’re giving — and then measure that against the impact you’d ideally like to have. With these elements in mind, it’s here that planning and implementing a giving strategy may help in creating a broader ultimate impact.
This document has been prepared for use by the RBC Wealth Management member companies, RBC Dominion Securities Inc. (RBC DS)*, RBC Phillips, Hager & North Investment Counsel Inc. (RBC PH&N IC), RBC Global Asset Management Inc. (RBC GAM), Royal Trust Corporation of Canada and The Royal Trust Company (collectively, the “Companies”) and their affiliates, RBC Direct Investing Inc. (RBC DI) *, RBC Wealth Management Financial Services Inc. (RBC WMFS) and Royal Mutual Funds Inc. (RMFI). *Member-Canadian Investor Protection Fund. Each of the Companies, their affiliates and the Royal Bank of Canada are separate corporate entities which are affiliated. “RBC advisor” refers to Private Bankers who are employees of Royal Bank of Canada and mutual fund representatives of RMFI, Investment Counsellors who are employees of RBC PH&N IC, Senior Trust Advisors and Trust Officers who are employees of The Royal Trust Company or Royal Trust Corporation of Canada, or Investment Advisors who are employees of RBC DS. In Quebec, financial planning services are provided by RMFI or RBC WMFS and each is licensed as a financial services firm in that province. In the rest of Canada, financial planning services are available through RMFI or RBC DS. Estate and trust services are provided by Royal Trust Corporation of Canada and The Royal Trust Company. If specific products or services are not offered by one of the Companies or RMFI, clients may request a referral to another RBC partner. Insurance products are offered through RBC Wealth Management Financial Services Inc., a subsidiary of RBC Dominion Securities Inc. When providing life insurance products in all provinces except Quebec, Investment Advisors are acting as Insurance Representatives of RBC Wealth Management Financial Services Inc. In Quebec, Investment Advisors are acting as Financial Security Advisors of RBC Wealth Management Financial Services Inc. RBC Wealth Management Financial Services Inc. is licensed as a financial services firm in the province of Quebec. The strategies, advice and technical content in this publication are provided for the general guidance and benefit of our clients, based on information believed to be accurate and complete, but we cannot guarantee its accuracy or completeness. This publication is not intended as nor does it constitute tax or legal advice. Readers should consult a qualified legal, tax or other professional advisor when planning to implement a strategy. This will ensure that their individual circumstances have been considered properly and that action is taken on the latest available information. Interest rates, market conditions, tax rules, and other investment factors are subject to change. This information is not investment advice and should only be used in conjunction with a discussion with your RBC advisor. None of the Companies, RMFI, RBC WMFS, RBC DI, Royal Bank of Canada or any of its affiliates or any other person accepts any liability whatsoever for any direct or consequential loss arising from any use of this report or the information contained herein.
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