A Real Estate Plan

Real Estate, Estate Plan

In our last blog, Gary expressed that the amount of real estate in existence was finite, and he didn’t want his donation to fall into the black hole. He was satisfied with the establishment of the organization’s foundation which would be a golden goose for the charity. So, he decided that part of his estate would include two significant real estate holdings to the organization. 

He had discussions with his accountants who took great lengths to ensure that these assets could be received and realized by the organizations. Ultimately, this took months of ongoing discussions for Gary’s wishes to be fulfilled. Although he passed away, Gary was at peace knowing that his land was being used by a good cause.  

Yet, while Gary went this route, it wasn’t the only direction available to him. You see, not all giving is straightforward, and there are many strategies that we explored with Gary as he was evaluating his options. Gary could have created a Donor Advised Fund (DAF) had he not chosen to donate to a charity directly. Let’s explore what this option would have looked like. 

Above) Gary’s donation resulted in him eliminating the tax through his charitable contribution. Gary’s heirs received $2,607,505 and Gay’s charity received $2,392,495. It’s was a win-win-win for all! 

What is a Donor-Advised Fund? 

A DAF is a giving account established at a public charity. It allows a donor to…

  • Make a charitable contribution 
  • Receive an immediate tax deduction 
  • Recommend grants from the fund over time 

One of the best parts is that donors can contribute to the fund as frequently as they’d like, and they can also recommend grants to their favorite charitable organization whenever it makes sense for them. 

DAFs are surging in popularity for philanthropic Canadians because of increased awareness. More than ever, advisors are discussing giving options with their clients. One 2018 survey of financial advisors showed that 91 percent believed that discussing philanthropy with clients was “important,” while 53 percent of those individuals saw it as “very important.” 

When you use DAFs, donors receive an immediate tax deduction for their contribution, and they have similar tax benefits as a private foundation. Bonus? You don’t have to deal with administrative responsibilities. 

How Can I Get Started with a Donor-Advised Fund? 

  1. Contribute assets

Establish your DAF by making an irrevocable contribution of your personal assets. This could be in the form of stock, real estate, cash, etc. 

  1. Receive your tax deduction 

Once you’ve established the DAF, you’ll be eligible to claim an itemized tax deduction for charitable contributions. The amount of the deduction will ultimately depend on several factors, but this is one of the primary benefits of giving through this means. 

  1. Personalize your account 

DAFs can be structured in a way that helps you meet your goals. You’ll be able to name your fund whatever you like, appoint individuals to help you manage the responsibilities, design a legacy plan, etc. 

  1. Invest your assets for growth 

The assets in your DAF are recommended based on your recommended strategy. Plus, any investment growth is tax-free!

  1. Support your favorite charitable organizations 

Once you’ve established your donor-advised fund, you can start recommending grants to the charitable organizations that mean the most to you.

Final thoughts 

Ultimately, Gary decided that he wanted to make a difference for others but not get too complicated with other strategies. If you’re in his position be sure to explore all the planned giving strategies available to you. Visit FUNDING matters for more information.