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HOW TO MAKE CHARITABLE DONATIONS GO FURTHER AS INFLATION AND INTEREST RATES RISE

Alison MacAlpine
Special to The Globe and Mail
Published October 25, 2022

People who think like philanthropists have already set money aside for the
causes they want to support – whether that’s in a private foundation,
donor-advised fund or bank account – so they’re less likely to change their
plans based on current market conditions.donald_gruener/iStockPhoto / Getty
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Canadians often make charitable donations toward the end of the year, both as a
seasonal tradition and to take advantage of a tax deduction in the current
taxation year. But, in the face of inflation, rising interest rates, market
volatility and a potential recession, some may be scaling back their charitable
plans.

That makes it all the more important for advisors to point out strategies to
their clients that make each donated dollar go further.

“In general right now, people are, of course, more cautious with how they choose
to spend their money,” says Jennifer Watson, managing partner at Watson
Investments in Oakville, Ont., and an advisor with Aligned Capital Partners Inc.

“We want to help our clients do what they want with their money, and help them
do that in the way that’s going to preserve as much money as possible and help
grow their money. … It’s no different with charitable giving.”

One of the most tax-effective ways to give, Ms. Watson says, is to make an
in-kind donation of a security that has a capital gain. Although financial
markets have been rocky this year, there are still some of those out there.
Transferring a security directly to a charity means there’s no capital gains tax
and results in a donation credit for the current market value.

For those who are business owners, Ms. Watson says it’s worth looking carefully
at whether it makes more sense for the company or the individual to make the
donation.

If the money has to come out of a corporation to cover a personal donation, it’s
important to have other reasons to incur the associated tax. That may make
sense, for example, for someone who will be applying for a new mortgage and
needs to demonstrate a certain amount of personal income. If there isn’t a good
reason to take money out of the company, making a corporate donation may be a
better option.

“You’re looking at it … from the perspective of what else is going on, and then
how can I get access to money with the least amount of taxes paid but still
achieve the value we’re trying to achieve,” Ms. Watson says.

TAKE A STRATEGIC APPROACH

Thinking like a philanthropist – rather than making one-off, modest donations –
can stretch charitable dollars, says Marvi Ricker, managing director of family
philanthropy and legacy planning at BMO Family Office in Toronto.



She says philanthropy needs to be “carried out in a manner that is meant to have
an impact on an issue, and it should be measurable and [driven by] a thoughtful
process over a long period of time.”

People who think like philanthropists have already set money aside for the
causes they want to support – whether that’s in a private foundation,
donor-advised fund, or bank account – so they’re less likely to change their
plans based on current market conditions.

Ms. Ricker adds that people can stretch their charitable giving dollars by
looking for matching opportunities. For example, to support recovery after
Hurricane Fiona, the federal government announced it would match personal and
corporate donations to the Canadian Red Cross for at least 30 days after Sept.
25. And, periodically, wealthy donors step in to match donations up to a certain
amount to encourage giving to health care and education fundraising campaigns.
Matched donations mean every dollar donated is worth two dollars to the charity.

“My role in advising people isn’t so much to say, ‘Give to this versus that,’”
Ms. Ricker says. “It’s to help [clients] figure out what’s important to them.
What are their passions and aspirations? What are their interests in the
charitable sector? And then to help them do it in an efficient and effective
manner and in a way that they know they’re having an impact.”

SYSTEMATIZE CHARITABLE GIVING AND GET CREATIVE

Charlie Spiring, founder and chairman at Wellington-Altus Financial Inc. in
Winnipeg, says that, in general, the wealthy are sticking with their
philanthropic plans. It’s middle-class people who are feeling the pinch in the
current environment. He also thinks a more strategic approach to charitable
giving can help.

“The key is to do your planning in advance and put your [philanthropic]
allocation away. Some people do 1 per cent, some do 2 per cent, and some do 5
per cent,” Mr. Spiring says. “But if you really, truly, strongly believe in it,
planning will get you there. And when you put some money aside, you don’t seem
to miss it as much.”

He’s seen this strategy work in practice. As an example, he points to the United
Way campaigns that encourage people to donate a little from every paycheque.
Systematizing charitable giving makes it a habit, and habits are hard to break.

It’s also possible for people – including advisors – to leverage their time and
creativity to amplify charitable contributions. During the pandemic, Mr. Spiring
approached his larger clients and explained that he and his wife planned to buy
meals from struggling restaurants to feed people in need. In the end, he raised
$1-million that helped keep restaurants afloat, their employees working, and
people fed.

“It was great to match up those that had time, money, or both to make it work,”
Mr. Spiring says. “There’s always a way if you have the will.”

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