You Gotta Learn It Before You Know It

My good friend David Tsubouchi, posts inspirational quotes that are spot on and remind us that we are human and that we don’t always get it right the first time.

I have worked with David on many initiatives over the years and he brings positivity, zeal and intelligence to every encounter.  He’s a people person who cares about others.

This week’s quote by Maya Angelou is in the sweet spot for charities, fundraisers and those helping donors make the right decisions. Realizing that asking for donations is one of the most difficult things that anyone can do, since it’s intimidating, non-linear, it depends on the prospective donor and those around them and it involves knowledge, skill, support and tools that help you achieve you and your donors goals.

This holds true in asking for donations. Whether you’re a fundraiser, a volunteer assisting in the raising of funds for your organization or an advisor in the area of investments, tax or law. The opportunity to learn, build skills, knowledge, techniques in presenting and asking the right questions and creating a comfort level isn’t something that comes naturally – but is learned by trial, error, failure and success.

Imagine illustrating the impact of a donation to a particular donor, you should see the benefit that it will give the organization along with its mission. Also, the benefit that the donor will receive from a tax efficient donation from appreciated assets or their estate.

Let’s look at the beauty of a program aimed at increasing art programs for underprivileged kids and the need to fund the space and some of the materials. Your donor has recently told you how she benefited from such a program when she was younger, that is why she has been a regular annual donor. She then follows up with “I wish I could do more, but…”

Educating charities and those individuals involved with them by suggesting, “what if there was a way you could do more, would you like to hear about that?” Getting the opportunity to inform the donor about their giving options can be easily learned and transmitted. This approach may actually identify when the donor might actually and truly be interested in learning. This also is a gentle approach that does not make the fundraiser come across as aggressive but simply serving in the role of an informed industry staff or volunteer.

Your donor is thinking about donating $100,000 to your arts fund. She is looking to write a cheque to your organization. She will receive the tax credit for her donation. Suggesting to your donor a donation of appreciated assets such as stock, your donor will not only receive the tax credit or tax deduction but additionally avoid the capital gains tax on their investment.

Let me demonstrate how this can be illustrated:

See the impact of your donation with GIFTABULATOR.

So You Won The Lottery, Now What?…

Over the years I have had the privilege of being interviewed by and presented with Patricia Lovett-Reid discussing the importance of estate and philanthropic planning to her audience and to many organizations, their supporters and members. It was a platform where we heard many interesting and challenging questions regarding estate and incorporating charitable giving. These sessions provided many answers to a myriad of issues, concerns around the importance of financial planning, how lawyers, accountants, and financial advisors needs to be engaged with their clients.

This past week, Patricia commented on LinkedIn a topic that we had not discussed in any of our encounters, that being, winning the lottery! What a great topic for new found wealth, that these lucky winners find themselves in and this especially relates to another lottery style windfall, inheritance. Just as if, your six or seven numbers were to come up, sometimes the same is true for an inheritance.

How much might one want to give to charity from the windfall? There are several options in looking at how one might become a philanthropist and have fun doing it. The $70M LottoMax is tax free but with the right investment strategy, however the growth after the first year is taxable. With your advisors, look at how much you can give away from your taxable capital gain to not only benefit a charity but yourself too.

The role that professional advisors play in helping these newly minted millionaires is invaluable. Let me show you a way we illustrate the tax calculation on a $70M lottery windfall. Assume that your $70M is invested and generates 6% ROI. The growth in year one will be a taxable capital gain of $4.2M. The tax on that $4.2M would be approximately $722,655. Now with a donation of $1.5M almost all of the tax is eliminated.

Now, assume your $70M windfall is invested at 6% you can have an impact of $2.45M in the second year. Every year afterwards your $70M will continue to grow even after you disburse 3.5% of your principal amount of $70M. 

The illustration on GIFTABULATOR will not only show your $70M principal growth over time but will also illustrate the impact you can have with your philanthropy now and into the future. 

We have developed GIFTABULATOR to calculate how much one can give to reduce their taxable capital gains. Don’t sell your taxable capital gain shares but work with your investment advisor and accountant and calculate how many shares your should gift to charity not to trigger the tax. This would be a real win-win-win for the donor, the charity and the advisor who helped make this a reality.

See the impact of your donation with GIFTABULATOR

Who Is Your Oraganization’s Superhero – A One Minute Read

Will the financial advisor be the charity’s superhero and save the day? Or, will the charity take the lead showing their donors the best ways to give?

I can’t tell you how often I’ve heard in the past 20 years, “we’re fundraisers and not financial advisors…I’m not going to have a discussion with my donor about what they have or how to give…they should discuss this with their financial advisors…we have some information on our website.”

Frankly, I’m glad that the financial advisors have become involved with charitable planning. It is the wake up call to all charities to get trained, have the tools and knowledge in having meaningful discussions with their donors. These discussions will lead to meaningful discussions with the advisors for their donors which will lead to profound changes in funds raised for these organizations.

The competition for donations is as great as ever, even though the opportunity to discuss charitable giving with donors hasn’t changed over the years. The donors have always been there but the charities haven’t been there to discuss the best ways for their donors to give.

What has changed is the competition has become that much greater for charities and it’s not from other charities.

The challenge is that in the past ten years the charitable giving market has just become that much more competitive.

Financial advisors have now entered the market with Donor Advised Funds (DAF’s), Private Foundations and other tactics to create a greater stickiness to the investments that they manage for their clients. It’s not a bad thing that this has occurred since charities have always had this option but never pursued it.

In reality, the charities are doing all of the hard work in terms of engaging their donors, but these charities are content in receiving cash donations that are more expensive than a donation of appreciated stock (For a recap see our latest blog).

All of the galas, golf tournaments, special events, direct mail, and online giving does not come close to the potential of a well cultivated donation where a well trained or skilled charity staff or volunteer engages with their donor and illustrates the best ways to consider a donation.

Donors can give more at the same net cost if the donation is in the form of an appreciated asset like a stock or mutual fund.

Stock donation = tax credit + avoid taxable capital gains (all pre-tax dollars)

Tax on a $100,000 taxable capital gain = $26,765

Cash/Cheque/VISA = tax credit (and you’ve used after tax dollars)

In the image above, you will see how the Capital Gains on your Stock and / or Mutual Fund investment will increase your taxes. If you chose to not make a donation you would be owing $26,765 on your investment.

Here is a scenario where you could offset that same Capital Gains tax with a donation that will not only benefit a deserving organization but also help with your taxable income. By donating a portion of your Capital Gains such as $100,000 in this case above, you see how you can reduce your tax and generate a tax credit of $44,112 where your $100,00 donation only costs you $55,888.

In the image above we see a case where the donation was made in cash. A $100,000 donation generates a tax credit of $40,960 costing you a total of $59,040.

Let’s create a win-win-win for the charity, the financial advisor and the donor.

  1. Give the charities and the advisors the tools the need to have informed and meaningful discussions with their clients and prospective donors;
  2. With the support of advisors, charities should engage in discussions with their donors to create endowed funding that support programming or operations; and
  3. A cooperative relationship between the advisors, the charities and the donors/clients can create opportunities for tax efficient giving.

I’d love to hear your thoughts, successes and challenges and how we can incorporate strategic philanthropy into your daily routine.

Happy Fundraising!

Bill

wpetruck@fundingmatters.com
416.579.0870

What’s In Your Wallet?

Asking for a cash donation may seem easier than a Major Gift, but is it the right thing to do for your organization? 

When you ask for cash donations you really don’t need to put the time into helping your donors while they are trying to help you and your organization.
 

When you ask for cash you don’t need to put the time into becoming a competent advisor or one who is willing to spend time with donors and provide direction or connections to those who can assist the donors in making a wise donation decision.
 

When you ask for a cash donation you don’t really need to learn new things like asset  based giving or options for giving.
 

When you ask for cash you’re not building the sustainability of your organization but meeting your current needs.
 But asking for assets makes sense for your donor and for your organization. 

When you ask for a cash donation you are asking your donor to give out of the smallest bucket that they have in the overall assets.  Cash is an asset but so are stocks, mutual funds, real estate, art, tangible personal property and registered investments and even private business shares. 

I am willing to bet that the cash holding for most of your donors is truly the smallest bucket of assets of all of their holdings.
 

Then why do you keep on taking the easy way out?

If you invested in the stock market over the past year, the gain represents an opportunity to discuss the advantages of donating shares to your charity rather than donating cash.  The share donation is pre-tax thus eliminating the tax owed on the donated shares.  Rather than donating cash where you’ve already paid the tax, your donation actually cost you more than if you donated the equivalent amount in shares.

In the Giftabulator scenario above, the donor lives in Ontario and has a household income of $91,101 which determines their tax bracket.  Their shares are worth $25,000 and they paid $10,000 for them.  Not a bad return on investment.  The tax on the asset is $2,605. A Major Gift of $5,000 provides a tax credit of $1,968 and reducing the tax to $637.  The actual cost of their donation when transferred from their investment account to the charity is $3,032.

Invest in yourself, invest in your organization, embrace new approaches to donor engagement, donor education and organizational sustainability.

For more information, please feel free to contact me.

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. 

Knowledge Hub 2

Raise more money for your organization!

Join us on Thursday May 13th to hear from an expert panel discussing
the opportunities and challenges raising funds today, and moving forward. 

Based on the popularity of this week’s Session, we have opened up with additional virtual seats – reserve your spot today!

Happy Fundraising, 

Knowledge Hub 2021

I am pleased to be part of the organizing committee Session 4 presenter and sponsor for Knowledge Hub.

Every not-for-profit organization needs to hear stories and insights about how organizational leaders have navigated their organizations through this period and how they are planning in moving forward.

I hope you can attend or share with your network.

Happy fundraising!

Gary And The Black Hole In Charity Land

Gary and the Black Hole in Charity Land

For the past few weeks, we’ve been reviewing the nine potential ways that you can give to charitable organizations. So far, we’ve reviewed stocksregistered retirement investments, and small business shares. This week, we’re diving into real estate with a unique donor named Gary.

Gary’s Story: Donating Real Estate to Charity 

Gary wasn’t your average donor. He said two things that reveal who he is and how he thinks. “Land — they’re not making more of it!” and “I don’t want to pay taxes when I die.”

These two sentiments aren’t often heard together in a donor discussion, but as a retired contractor who had invested in land development over the years, Gary focused on people, places and things. He was a widower with one adult child, and he was a hard-working individual who could always be counted on to financially support his favourite organizations. 

For instance, one of Gary’s charities once received a $1 million challenge grant. Without hesitation, he pledged $100,000. His philanthropic giving was always done quietly and without recognition.  When he saw the community’s donations were at $850,000, Gary called to kick in that last $150,000. Of course, everyone wanted to know, “Who was the final donor?” The response was “Anonymous.” 

But Gary wasn’t done with his giving. As he described, he had large tax obligations due to his large amount of taxable capital gains. His accountant alerted him to update his will and told him to plan to allocate his assets and look at which organizations might help him reduce his taxes. 

At FUNDING matters, we’re familiar with how this can be done thanks to the Power Donor Experience and the GIFTABULATOR. If you’re in a similar situation to Gary, make sure you check out our resources to minimize your taxes. 

See the impact of your donation with GIFTABULATOR

The Black Hole of Charitable Giving

Gary would often say that he felt that he was putting his money into a “black hole” when donating to charities. He never knew where the money went or how it was spent. No one in his family shared his spirit of community support or charitable giving either. 

However, thanks to his accountant’s advice, Gary knew that charitable giving could help him out of his dilemma of paying taxes when he died. To get this process started, Gary approached a charitable organization about establishing a foundation. When Gary passed, the organization would receive a donation from Gary. 

The process ended up working out well for him. The foundation was established, the board was nominated and elected, the Investment Policy Statement (IPS) was created, and information about the new foundation was slowly shared. The IPS was based primarily on stocks, mutual funds, and cash donations from estates. 


While Gary was alive, he had a $3 million property that he acquired many years ago. With real estate values at an all-time high, this would have been an ideal time to sell; however, it also would have meant immense capital gains tax. Fortunately, he also had the option to donate the property. 

The property was donated, and the charity’s foundation received the largest donation in its history. Gary requested that the organization retained the property until he passed since it could be used as a wonderful retreat for community members. It could even generate new revenue for the charity! 

Final thoughts

Gary has since passed, but he gave direction in his estate for another major asset to be given to the foundation he created. In the next blog, we’ll cover Gary’s estate bequest.