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Christopher Richardson - Public vs. Private Foundations & Charitable Gift Planning

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Christopher Richardson - Public vs. Private Foundations & Charitable Gift Planning

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Page 1: Christopher Richardson - Public vs. Private Foundations & Charitable Gift Planning
Page 2: Christopher Richardson - Public vs. Private Foundations & Charitable Gift Planning

Creating Creating YourYour Enduring Enduring Legacy --Legacy --

utilizing a DAF or a Private utilizing a DAF or a Private Foundation.Foundation.

[and other gift planning matters of interest] [and other gift planning matters of interest]

Christopher JK Richardson, FCAChristopher JK Richardson, FCACharitable Gift Planning Consultant and Philanthropy Charitable Gift Planning Consultant and Philanthropy

Advisor, Vancouver.Advisor, Vancouver.

Estate Planning Council of AbbotsfordEstate Planning Council of AbbotsfordWednesday, February 16th, 2011 [noon]Wednesday, February 16th, 2011 [noon]

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OverviewOverview

• opening comments …opening comments …• your place …your place …• the choice(s) …the choice(s) …• background, terminology and definition.background, terminology and definition.• historical perspectives.historical perspectives.• recent experience.recent experience.• a variety of choices a variety of choices - categories.- categories.

- components.- components.

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Overview Overview (2)(2)

• a variety of choices a variety of choices - categories.- categories.

- components.- components.

• one gift planner’s view –one gift planner’s view –• the answer,the answer,• trendstrends• learnings and the ultimate learning,learnings and the ultimate learning,• the numbers, the numbers, • what’s nextwhat’s next• everything elseeverything else• concluding remarks, questions and comments.concluding remarks, questions and comments.

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Overview Overview (3)(3)

additional materials –additional materials –– the gift option continuum,the gift option continuum,– list of DAFs ( current list, available on list of DAFs ( current list, available on

request )request )– ‘‘donor-centred’ holistic approach,donor-centred’ holistic approach,– decision-tree,decision-tree,– matters to consider,matters to consider,

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Opening CommentsOpening Comments

• how times change but needs do not,how times change but needs do not,• ‘‘smart’ (comfortable) fundraising is smart’ (comfortable) fundraising is

even more important,even more important,• when you ASK for money… you get when you ASK for money… you get

advice – key now is stewardship of advice – key now is stewardship of donors and friends --- ASK for advice donors and friends --- ASK for advice and you are liable to get money. and you are liable to get money.

• LET the journey begin … … … … … …LET the journey begin … … … … … …

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your place …your place …

… … as a trusted advisor as a trusted advisor

•it is imperative that when dealing it is imperative that when dealing with each of the various transactions with each of the various transactions with each of your clients that you look with each of your clients that you look & listen for the obvious and subtle & listen for the obvious and subtle ‘charitable hints’ and philanthropic ‘charitable hints’ and philanthropic ‘door openers’ …..‘door openers’ …..

7

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the choice(s) …the choice(s) …

• direct giving,direct giving,• indirect giving utilizingindirect giving utilizing

– a donor advised fund (DAF) and / ora donor advised fund (DAF) and / or– a private foundation.a private foundation.

• Remember – Remember – when in doubt, we do when in doubt, we do nothing …nothing …

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DAF Background --DAF Background --TerminologyTerminology

BEWAREBEWARE -- depends upon who you are … -- depends upon who you are …• donor-advised funds = DAFs donor-advised funds = DAFs

traditional term, preferred by traditional term, preferred by community community foundations (cfdns)foundations (cfdns)

• charitable gift funds = CGFscharitable gift funds = CGFs

preferred by new non-cfdnspreferred by new non-cfdns• ‘‘commercial’ gift funds = CGFscommercial’ gift funds = CGFs

used by ‘some’ to refer to recent used by ‘some’ to refer to recent offerings. offerings.

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BackgroundBackground -- -- A ‘working’ A ‘working’ definitiondefinition

• a ‘separate’ fund operated within a a ‘separate’ fund operated within a public foundation that permits public foundation that permits advise on distributions / grants to advise on distributions / grants to otherother charities charities [qualified donees],[qualified donees],

• 3 areas of advice / recommendation –3 areas of advice / recommendation –– advice on grant distribution,advice on grant distribution,– ability to name advisor,ability to name advisor,– ability to advise on asset mix or other matters such as ability to advise on asset mix or other matters such as

succession.succession.

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BackgroundBackground -- -- A fine line … A fine line … ……

according to CRA, according to CRA, • ‘‘primary concern with DAFs is that , primary concern with DAFs is that ,

if too much control is retained by the if too much control is retained by the donor, they will not be considered a donor, they will not be considered a gift-at-law, and could not be gift-at-law, and could not be receipted’,receipted’,

• ‘… ‘… need to be careful and warn need to be careful and warn donors that input by the donor is of donors that input by the donor is of an advisory nature only’,an advisory nature only’,

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The American ExperienceThe American Experience

• DAFs began as an offering of Cfdns,DAFs began as an offering of Cfdns,• Fidelity established in 1965 and by Fidelity established in 1965 and by

mid-90’s mid-90’s impactimpact caused calls for caused calls for definition & regulations, overall, definition & regulations, overall, emerging positive and accepting emerging positive and accepting attitude towards DAFs,attitude towards DAFs,

• DAFs removed from IRS “DAFs removed from IRS “Dirty Dirty DozenDozen” List of Tax Scams,” List of Tax Scams,

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The American ExperienceThe American Experience (2)(2)

• short-fall seems to focus on lack of short-fall seems to focus on lack of ‘localized’ granting advice,‘localized’ granting advice,

• reductions in fees and reduced reductions in fees and reduced ‘entry’ amounts have occurred ‘entry’ amounts have occurred recently to continue growth.recently to continue growth.

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The Canadian ExperienceThe Canadian Experience

• Community Foundation (Cfdns) and other Community Foundation (Cfdns) and other DAFs have existed – most religious,DAFs have existed – most religious,

• initial ‘apoplectic’ response to possible initial ‘apoplectic’ response to possible ‘Fidelity North’‘Fidelity North’ replaced by one of replaced by one of cooperation, cooperation,

• initial response by CRA-CD to DAF was initial response by CRA-CD to DAF was ‘cautious’, ‘cautious’,

• new DAFs identified in the last 24 months, new DAFs identified in the last 24 months, andand

• on-line option now in on-line option now in beta -- CHIMPbeta -- CHIMP..

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Categories of DAFs Categories of DAFs (1)(1)

• charities charities – community foundations community foundations (geographical)(geographical),,– faith-based, example various Jewish cfdn faith-based, example various Jewish cfdn (geographical)(geographical), ,

nationalnational– specific, ex. SickKids, Toronto General and Western Hospital specific, ex. SickKids, Toronto General and Western Hospital

Foundation,Foundation,– specific ‘area of interest’, ex. environmental, social justice, specific ‘area of interest’, ex. environmental, social justice,

medical and women,medical and women,• financial institutions,financial institutions,

– ‘‘pure’ DAFs andpure’ DAFs and– other ‘alliances’ / ‘private label’ /other ‘alliances’ / ‘private label’ /’white label’ ’white label’ and ‘referral’ and ‘referral’

arrangements,arrangements,• investment dealers,investment dealers,• investment counselors, investment counselors, • other independent ‘enablers’, andother independent ‘enablers’, and• a recent on-line option.a recent on-line option.

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Categories of DAFs Categories of DAFs (2)(2)

• another way to classify –another way to classify –– general,general,– retail,retail,– ‘‘boutique’ / ‘specialty’ / ‘targeted’.boutique’ / ‘specialty’ / ‘targeted’.

• ‘‘longevity’ – endowment / gift fund / longevity’ – endowment / gift fund / hybrids.hybrids.

• another way – another way – ‘motivation’ –‘motivation’ –

– ‘‘philanthropic service’, or philanthropic service’, or – ‘‘product’.product’.

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Main Components Main Components of a DAF and a private of a DAF and a private

foundationfoundationA variety of options exist –A variety of options exist –

• establishment,establishment,• investments – what and by whom,investments – what and by whom,• granting andgranting and• administration, stewardship, fees administration, stewardship, fees

and compliance and philanthropic and compliance and philanthropic advice.advice.

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Key ComponentsKey Components• initial capital initial capital • additions,additions,• restrictions upon treatment of contributionsrestrictions upon treatment of contributions

-- no longer apply – was flow-thru and -- no longer apply – was flow-thru and 10-year,10-year,

• ability to choose advisor,ability to choose advisor,• ability to ‘influence’ investment mix,ability to ‘influence’ investment mix,• availability of ‘localized’ granting advice,availability of ‘localized’ granting advice,• distribution rate, distribution rate, • minimum grant amount,minimum grant amount,• ability to grant capital,ability to grant capital,

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Key Components Key Components (2)(2)

• transfer now or later to charity or private transfer now or later to charity or private foundation,foundation,

• succession – limited or not,succession – limited or not,• ‘‘default’ use of funds, default’ use of funds, • various fees,various fees,• reporting,reporting,• newsletters and briefings, newsletters and briefings, • availability of philanthropic advice,availability of philanthropic advice,• governance. governance.

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• it depends …it depends …

• are the initial and on-going costs are the initial and on-going costs justifiable ?justifiable ?

• quantum, timing and type of asset(s) to quantum, timing and type of asset(s) to be gifted,be gifted,

• other motivations – desire to be other motivations – desire to be involved with the details … involved with the details …

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the answerthe answer

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TrendsTrends

• increased flexibility as rigid limitations increased flexibility as rigid limitations are being re-examined, are being re-examined,

• increased communication and increased communication and stewardship stewardship - newsletters, - newsletters,

• fees are being reexamined -- ‘ala carte’, fees are being reexamined -- ‘ala carte’, some ‘nuisance’ and some posted ‘fees’ some ‘nuisance’ and some posted ‘fees’ are not being implemented,are not being implemented,

• transitional flexibility being offered to transitional flexibility being offered to allow for future and change of allow for future and change of circumstance. circumstance.

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LearningsLearnings

• continued growth -- attracting new funds,continued growth -- attracting new funds,• attracting philanthropic, ‘self-reliant’, ‘tax-attracting philanthropic, ‘self-reliant’, ‘tax-

avoidance’ individuals,avoidance’ individuals,• opportunity to expose philanthropy to new opportunity to expose philanthropy to new

individuals,individuals,• some cfdns are offering to permit you to some cfdns are offering to permit you to

retain existing advisors,retain existing advisors,• call for flexibility is causing some to call for flexibility is causing some to

reexamine business model to avoid any reexamine business model to avoid any ‘shaking out’. ‘shaking out’.

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the Ultimate Learningthe Ultimate Learning

• the proliferation of DAFs has served the proliferation of DAFs has served as a ‘door opener’ ……as a ‘door opener’ ……

– for charities,for charities,• to advance / begin an on-going relationship.to advance / begin an on-going relationship.

– for financial institutions / investment for financial institutions / investment dealers and counselors and others, dealers and counselors and others, • to enhance on-going relationships. to enhance on-going relationships.

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the numbersthe numbers

THE THE main difficult issue with DAFs is (still):main difficult issue with DAFs is (still):

Fees Fees no it isno it is CommissionsCommissions,,and their impact uponand their impact upon

allocatable / spendable amounts.allocatable / spendable amounts.

• once the issue of remuneration is resolved the once the issue of remuneration is resolved the question is whether the net distributions to question is whether the net distributions to charities will provide a sustainable ‘business charities will provide a sustainable ‘business model’ for all the DAFs? model’ for all the DAFs?

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DAFs

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What’s NEXTWhat’s NEXT

• undoubtedly MORE retail DAFs in the undoubtedly MORE retail DAFs in the longer-term,longer-term,

• increased increased flexibilityflexibility to address personal to address personal interests of donors (now and in the future),interests of donors (now and in the future),

• after initial period, lower fees and lower after initial period, lower fees and lower minimums to sustain growth in the ‘retail’ minimums to sustain growth in the ‘retail’ sector,sector,

• need to measure actual impact of DAFsneed to measure actual impact of DAFs-- by whom,-- by whom,

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What’s NEXT What’s NEXT (2)(2)

• creation of ‘strategic’ partnerships to creation of ‘strategic’ partnerships to obtain necessary community linkages,obtain necessary community linkages,

• face-to-face opportunities to assist andface-to-face opportunities to assist and complement on-line resources,complement on-line resources,

• strong attempts by commercial DAFs to strong attempts by commercial DAFs to demonstrate relevance & cost/benefit demonstrate relevance & cost/benefit (defensive).(defensive).

• And maybe a ‘back-room’ private foundation And maybe a ‘back-room’ private foundation service-provider.service-provider.

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Everything elseEverything else

• the end of the ‘downturn’ and its impact as we the end of the ‘downturn’ and its impact as we move forward … what did we learn …move forward … what did we learn …– time for long suggested donation ‘stimulus’ provisions ?,time for long suggested donation ‘stimulus’ provisions ?,

• 2010 budget and impact of reduced dq 2010 budget and impact of reduced dq requirements,requirements,

and the new T3010 A, B and -1and the new T3010 A, B and -1• new(ish) audit regime,new(ish) audit regime,• on-going CAGP*ACPDP CRT proposal to Finance,on-going CAGP*ACPDP CRT proposal to Finance,• a charity flow-through ltd ptnership – ‘to not audit’, a charity flow-through ltd ptnership – ‘to not audit’, • other stuff …. other stuff ….

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Concluding comments, Concluding comments, questions and input …… questions and input ……

ThanksThanks..• philanthropic exposure is always good as philanthropic exposure is always good as

long as it is based upon knowledge and long as it is based upon knowledge and results in a positive experience for the results in a positive experience for the donor, the charity and the community,donor, the charity and the community,

• ONLY TIME WILL TELL……. ONLY TIME WILL TELL……. thank youthank you..

• as we move forward ….as we move forward ….how can I / we improve this how can I / we improve this ‘journey’.‘journey’.

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Christopher JK Richardson, FCAChristopher JK Richardson, FCACharitable Gift Planning Consultant &Charitable Gift Planning Consultant &

Philanthropy AdvisorPhilanthropy Advisor, , 2792 West 152792 West 15thth Avenue, Avenue,Vancouver BCVancouver BC V6K 2Z8V6K 2Z8

Telephone:Telephone: (H/O)(H/O) (604) 739 – 4756(604) 739 – 4756(H)(H) (604) 731 – 4781(604) 731 – 4781(Cell)(Cell) (604) 218 – 0981(604) 218 – 0981

FAX:FAX: (604) 731 – 4721(604) 731 – 4721 Email:Email: [email protected]@direct.ca

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Additional materials --Additional materials --

These slides are not included as part These slides are not included as part of the actual presentation of the actual presentation

but may be referred to…… but may be referred to……

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Cash (A),Cash (A),  

Gifts in Kind including Gifts in Kind including   Publicly traded securities including ‘listed’ securities (A),Publicly traded securities including ‘listed’ securities (A),  Appreciated and / or Depreciated property (B), Appreciated and / or Depreciated property (B),

    Principal Residence (B)Principal Residence (B),,

Non-qualifying and ‘excepted’ shares (C),Non-qualifying and ‘excepted’ shares (C),    the rest (C). the rest (C).

Charitable Life Insurance policies (A),Charitable Life Insurance policies (A),

OUTRIGHTOUTRIGHT Charitable Remainder Trusts (B),Charitable Remainder Trusts (B),** Interest-free Loans (B),Interest-free Loans (B),

  

*** Endowments/Donor Advised Funds/Private *** Endowments/Donor Advised Funds/Private FoundationsFoundations  ***  ***

Charitable Gift Annuities (A), Charitable Gift Annuities (A),   

DEFERREDDEFERRED Certified Cultural Property (?), Certified Cultural Property (?),

Ecological Sensitive Land (?),Ecological Sensitive Land (?),  

Residual Interest Gifts (B), Residual Interest Gifts (B),    Retirement / Savings Plans (A)Retirement / Savings Plans (A)

THE GIFT OPTION CONTINUUMTHE GIFT OPTION CONTINUUM   Bequest (A).Bequest (A).

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A DAF within a ‘donor-A DAF within a ‘donor-centred’ holistic approachcentred’ holistic approach

Hopefully, discussions will be –Hopefully, discussions will be –– creative,creative,– comprehensive within a comprehensive comprehensive within a comprehensive

investment / estate ‘plan’,investment / estate ‘plan’,– realistic,realistic,– timely ( donor’s time ),timely ( donor’s time ),– professional,professional,– tax-effective (as distinct from tax minimized),tax-effective (as distinct from tax minimized),– understandable andunderstandable and– with integrity.with integrity.

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The decision-tree = The decision-tree = the gift planners “the gift planners “value-value-

added”added”

without a thorough examination of the without a thorough examination of the donor’s circumstances along with an donor’s circumstances along with an identification of future possibilities identification of future possibilities

MATCHEDMATCHED with a thorough knowledge with a thorough knowledge of the features of each gift of the features of each gift ‘structure’,‘structure’,

-- -- an informed decision cannot be madean informed decision cannot be made..

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Matters to ConsiderMatters to Consider

in summary –in summary –• ability to create personal / family ability to create personal / family

foundationfoundation, , • any overriding decision factors,any overriding decision factors,• timing of recipient identification timing of recipient identification

decision,decision,• necessary comfort level,necessary comfort level,• timing of impact of gift – now, over time,timing of impact of gift – now, over time,• quantum of giving, now and later,quantum of giving, now and later,

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Matters to ConsiderMatters to Consider (2) (2)

• type of assets available to be gifted, type of assets available to be gifted, • how involved do you and your family how involved do you and your family

want to be, now and later?want to be, now and later?• how much guidance do you need in how much guidance do you need in

the areas of –the areas of –– investment decisions,investment decisions,– granting and philanthropic advice, andgranting and philanthropic advice, and– compliance support, compliance support,

• what what ‘structures’ ‘structures’ would be acceptable,would be acceptable,

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Matters to ConsiderMatters to Consider (3) (3)

• costs, fees and expenditures,costs, fees and expenditures,• contact(s) -- DAF people, investment contact(s) -- DAF people, investment

advisors & reps, salesmen and gift advisors & reps, salesmen and gift planners, planners,

• face-to-face access to knowledge and face-to-face access to knowledge and experience with your ‘local’ experience with your ‘local’ charitable community,charitable community,

• the paper work and compliance. the paper work and compliance.