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Saturday, January 19, 2008

Philanthropy... feels great!


Trying to add a little summer warmth to this spectacular day we are having here on the
pond. This is a Hummingbird Moth that used to visit our Zinnias regularly. It has
an ability to sip deeply like the Hummer, but is much more colorful... and
stands still for photos.

Nova Scotians know that it feels great to give to those who don't have what they need... be it food, money, care, gifts, blood, organs and so on. Most of this giving, comes deep from the heart and is a tradition that is supported in the Bible where in Acts 20 we find the verse "In everything I showed you that by working hard in this manner you must help the weak and remember the words of the Lord Jesus, that He Himself said, 'It is more blessed to give than to receive.'" It runs through each religion, some ancient and certainly modern cultures, that contributing to the betterment of others is a 'good' practice.

But isn't it worth considering benefits beyond simply 'feeling good', or being "more blessed" when we consider giving... perhaps it is worth at least learning about other benefits of giving. Here following are a few things to think about:

  • simply donating cash and other financial assets to registered charitable entities (*) can reduce your taxes
  • establishing a foundation used to donate money to registered charitable entities (*) can reduce your tax payable and leave you with an asset having long term growth with a principle that's accessible in ten years
  • both of these expressions of financial giving are accessible to people of all income ranges, and should be considered when planning philanthropic expressions (investments), they don't have to be an end of the year panic act(ion)

(*) as defined in the Canadian Income Tax Act

It is a relatively well known process... donating to a charitable entity like some youth sports organization, a health research entity (the Cancer foundation), an educational scholarship foundation ( The Hutton-Chard Foundation at SMU)... for example. These things usually make us feel good, and probably do the entities some good. I think these are great things for the entities, but really don't do as much for the giver as they could. The old adage that 'it is better to give than to receive' is all well and good... but nothing says the giver shouldn't maximize his/her tax benefit.

Normally the assets (**)that we give to these charities are in small denominations and are not part of an annual strategy. However, the Canadian Income Tax Act gives us the option of much greater opportunity for tax savings, while still getting the good feeling of 'having given'. I am referring to forming a Registered Charity Foundation. Now before you scream that you are not 'rich enough' to form a registered charity, let me tell you that if you are reading this, it is very likely that you in fact are 'wealthy' enough to invest in a registered charity foundation of your own.

Revenue Canada allows anyone who has a 'Tax Payable' to SIGNIFICANTLY reduce that tax payable by establishing a Registered Charity Foundation. The amounts are worth looking at in an example like this... if you have $5,000 tax payable at the end of your annual calculation and you invest $10,000 in your foundation, your tax payable will be reduced dramatically. Then, if you let that ten thousand dollars ride in your foundation for thirty years, with average annual growth of 7%, you would have granted $14,718 to charities over the period, and you would still have $19,897 in the account for your use in retirement. As well, you would have saved over $2,500 in the original tax bill. If you needed the money after ten years, you would have $12,528 after having granted $4,235.
You don't reduce your principle, and you are required to grant 3.5% of the principle value each year (as long as the foundation earns enough).

The example above is given in long hand, because I am having limited success uploading graphs for you to look at on the blog. I will follow this up with some sites that you can visit at BMO and other institutions. But I want to emphasize that the example above is only one year of planning... this is a great way to manage all your donations, and end up with a real nest egg. You get the tax savings up front; the annual ability to donate to your favorite cause; a nest egg for retirement or other use; and the satisfaction that you accomplished a philanthropic feat through good planning.

Lynnda and I formed a foundation following the guidance of the BMO Harris Private Bank and their Halifax based investment group. BMO has a vice president who is responsible for philanthropic giving... her name is Marvi Ricker [marvi.ricker@bmo.com] and the group has been fantastic for us. I am certain that other institutions have similar services, but if they don't, write Marvi a note and she will put you on the right path.

Our foundation this year granted five $3,000 scholarships to students at the Nova Scotia Community College. They are taking courses in the building trades and medical technology... two single mothers, one taking taking pipe fitting and the other med tech; the other three were young men with families taking carpentry and electrical engineering. Combined, their average grade is 92! You can't imagine the pleasure this type of giving can give you, if you plan it right.

A very good non-commercial website for philanthropic planning is:
www.cfc-fcc.ca/prof-advisors/guide/pg8.cfm

Another that will give you many options to look at investing while giving:
www.charityvillage.com/cv/ires/ires15.html

Bill Clinton has also written about philanthropy in his book simply titled GIVING. Information on the book and his program is at http://www.clintonfoundation.org/giving

We learned a lot from Clinton's TV program on giving, and it motivated us to get more involved in philanthropy and giving back to the community that made things good for us. It actually feels great to be involved, and the time invested gets us away from the TV.

A very cool place on the BMO web site is listed here. I have found this very helpful. http://www.bmoharrisprivatebanking.com/What_We_Do/Giving.asp

I hope this has been helpful information to you, and that you will allow me to write on it again in the future, when I have figured out how to up-load information to the blog site. If you have any questions, don't hesitate to let me know.

Please remember that SUCCESS NOURISHES HOPE

(**) Assets can include cash, but a larger advantage in giving is to use investment shares that have appreciated significantly... you can give them at market value without declaring the gain in your taxable income, and the gift as a deduction.

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Grad. Saint Mary's University, 1975, got into the medical device business initially in sales, then various management positions up to president, all in Medical Devices. I prefer therapy products over diagnostic, but they are all fun, and in a way have defined my life. I have now evolved, with help from my 35 year partner Lynnda with whom I now share every hour. I am into staying healthy, photography, kayaking, bicycling, gardening and two books a week. I wish I had gotten to this stage earlier!