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Planning to give it away

CV TrustCo July 9, 2019

In our last blog, we spoke about increasing the odds of building a successful Continuity Plan with the core premise for success being “communication”. Unfortunately, one of the conversations that is often forgotten centers around philanthropic interests.

How many people wait to leave something for a cause or organization they care about only in their will? Often, there is no family discussion about the importance of the cause to the deceased – the donation is often a huge surprise when the will is read.

A great way to promote togetherness and communication within families today is to give funds during your lifetime. So, communicate and don’t wait to donate!

Donating as a multi-generational family

Langley’s Carlson family recently made a multi-generational family gift of $500,000 towards the new Emergency Room at the Langley Memorial Hospital. Multiple generations of the Carlson family were born, treated, and received end of life care in that community. It was important for them that they talk about the role the hospital played and to give together as a family. You can read their story here.

Communicating what the family’s values are, why certain causes or charities are supported, and different methods of support are conversations that provide context and history for multi-generational family inheritances to make a meaningful difference, and to teach younger family members the value of giving back.

Private and public foundations

Executing on their philanthropic values and wishes, families often set up foundations to ensue their money gets spent wisely. The two main types are a:

  • Private foundation; or
  • Public foundation (think community foundation, donor advised fund, an independent, or through your bank)

The first, and most important thing to know is that a “public” foundation is private, and a “private” foundation is public. With a public foundation, one can remain anonymous as the public foundation is the front-line entity. On the flip side, a private foundation is required to file their information with the CRA, which is then made public.

Considerations and observations

We will leave you with the following considerations and observations:

  • A private foundation can set the rules and manage accordingly. For example, Bill and Melinda Gates have stipulated that their foundation will only last 50 years beyond their lifetimes. We have a client whose assets are earmarked for charity who wants it all spent within 10 years of his passing – as their executor and trustee, we will project-manage that whole process.
  • Many public foundations are structured as endowments, where your initial donation is set up and put in a pot, and only the income it earns is given away annually, with the initial capital saved in perpetuity. Many of these organizations are now beginning to build flexibility into their structures to “spend-down” the fund; in other words, to also have your capital given away over a specified period of time. Ask the spend-down question.
  • Don’t be too rigid in your philanthropic planning. We are aware of a foundation that was set up decades ago to fight a specific disease, which now has pretty much been eradicated. The unfortunate part is, because the language in the founding document was so rigid, that money is now sitting doing nothing because it can’t go to anything else, even though the original cause is no longer relevant. Remember to leave flexibility.
  • If you want to support a small local charity, there’s a chance they may not exist in 5/10/25 years, or that their current mandate will change. Make sure there’s flexibility put in your documents about ensuring that the specific organization is still in the business and if not, that your executor can choose a different charity with similar mandates to your original passion. Consider just naming a cause, and let your administrators make those decisions later.

I wonder if the tobacco billionaire James Duke was clear in his family’s philanthropic planning for their only child, Doris, to make a $100,000 donation to fund the Beatles trip to India to attend a Transcendental Meditation training course at Maharishi Mahesh Yogi’s ashram? Oh, and don’t forget about leaving control of their fortune to the butler on Doris’ death…

See you next quarter!