Philanthropy with Philanthropic Desire

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The phrase "Philanthropy with Philanthropic Desire" means using a strategic, impactful approach to giving (Philanthropy) that is driven by a genuine, deep-seated love for humanity and a personal compulsion to help (Philanthropic Desire).

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It is a complete concept that unites the "heart" (desire) with the "head" (strategy).

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To discuss further or for questions of clarification please contact Mark Albert, CEA, EPC at either:

416-659-6655 or markalbertpfs@gmail.com.

• Proud member of Estate Planning Council of Canada​​​

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Philanthropic Desire: The "Why" (The Motivation)

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• Definition:

  • This is the underlying human impulse: the core value, conviction, or emotional response which makes a person want to give. It is the "love of humanity" at the root of the word.

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• Advisory Focus:

  • As an advisor, identifying this desire is the first step. It comes from asking your client about their values, their life experiences (e.g., a family member's illness, a childhood struggle), and their legacy goals.

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• The Problem:

  • Desire alone often leads to unplanned, emotional, and potentially inefficient giving (e.g., reactive giving in response to a plea for a quick fix).

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Philanthropy: The "How" (The Strategy)

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• Definition:

  • This is the deliberate, organized action of giving resources with the goal of achieving long-term, systemic change (addressing the root cause of a problem). It moves beyond simply providing immediate relief (charity).

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• Advisory Focus:

  • This involves using technical skills to implement the desire through tax-efficient, high-impact strategies. This includes setting up the right financial vehicles (DAFs, trusts, foundations) and optimizing the assets given (appreciated stock vs. cash).

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• The Problem:

  • Strategy alone, if disconnected from a genuine desire, can feel transactional, mercenary, and focused only on the tax deduction, leaving the client feeling unfulfilled.

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Philanthropy with Philanthropic Desire

 

When the two are combined, you achieve the most powerful form of giving:

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Maximum Donor Satisfaction: The giving is meaningful, not just tactical,

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Maximum Social Return: The gift is structured to maximize its value while providing the best tax outcome for the client's estate.

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Enduring Impact: The client's values are institutionalized and carried on by future generations.

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Integrating Philanthropy Into Your Estate Plan

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Integrating philanthropy into your estate plan is a cornerstone of modern wealth management for high-net-worth clients. It is the most powerful way to align a client's values and legacy wishes with sophisticated tax and wealth transfer strategies.​

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The process has three major benefits: Tax Efficiency, Legacy Building, and Family Engagement.

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Tax Efficiency and Wealth Preservation

 

Charitable gifts are one of the most effective ways to reduce tax liability for an estate, particularly in jurisdictions with high estate or capital gains taxes (like Canada, as an example, where the annual donation limit rises to 100% of net income in the year of death).

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• Taxable Estate Reduction

  • The value of assets bequeathed to a qualified charity is removed from the taxable estate, which can significantly reduce or even eliminate estate taxes.

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• Capital Gains Elimination

  • Donating appreciated assets (publicly traded securities, real estate, mutual funds, or private company shares) in-kind to a charity eliminates the capital gains tax that would otherwise be due upon the sale or deemed disposition at death. The estate receives a tax credit for the full fair market value.

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• Retirement Account Optimization

  • Designating a public charity as the beneficiary of an RRSP/RRIF (or other defined contribution plans) is highly tax-efficient. The plan proceeds are normally fully taxable to the estate, but the corresponding charitable donation credit can fully offset this income, resulting in a tax-neutral transfer to the charity.

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Key Philanthropic Estate Planning Vehicles

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Advisors use several specific structures to achieve a client's giving goals, based on their desire for control, immediate tax savings, and income needs.

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• Charitable Bequest

  • A simple gift of a specific dollar amount, percentage, or residual asset allocated to a charity in the Will or Trust.  Simplicity and Flexibility: The gift is revocable until death and is a straightforward way to create a donation tax credit for the estate.

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• Donor Advised Fund (DAF)

  • The client irrevocably contributes assets to the DAF during their lifetime (getting an immediate tax deduction), but the funds are invested and granted out to charities over time, including after death, via named successor advisors.  Immediate Deduction, Deferred Action: The client gets the tax credit now, and their family can continue the giving legacy for years.

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• Charitable Remainder Trust (CRT)

  • An irrevocable trust is created. Income goes to the donor/family for life or a term of years. The Remainder goes to charity.  Income Stream & Tax Break: Converts appreciated assets into an income stream for the client/heirs while providing an immediate partial tax deduction based on the present value of the remainder interest.

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• Charitable Lead Trust (CLT)

  • The Charity receives an income stream for a term of years. The Remainder goes back to the donor's family (often at a reduced transfer tax cost).  Wealth Transfer: Provides income to charity now, then transfers assets to heirs later with potential estate/gift tax savings.

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• Private Foundation

  • A separate legal entity (trust or corporation) that is fully controlled by the family.  Maximum Control & Legacy: Allows the family to hire staff, manage investments, and involve future generations in active grant-making. (Requires significant administration and cost.)

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• Life Insurance & other Registered Investments

  • The charity is named as the beneficiary of a Registered Investment or a new or existing policy.  Liquidity: Creates a large, tax-free gift for charity at death using relatively small premium payments during life.

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Legacy Building and Family Engagement

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Beyond the financial mechanics, the most significant impact of integrating philanthropy is on the family's legacy.

• Values Alignment:

  • It ensures the client's final transfer of wealth reflects the values and causes they championed during their lifetime.

• Preventing Wealth Erosion:

  • Thoughtful planning can avoid a large portion of the estate being used to pay taxes, instead directing those assets to a meaningful charitable purpose.

• Engaging the Next Generation:

  • Vehicles like the DAF or Private Foundation are excellent tools for bringing children and grandchildren into the decision-making process, teaching them about stewardship, and fostering a shared family value system.

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Philanthropic Desire (The Motivation)

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Philanthropic desire refers to the internal, psychological, and emotional drive that motivates a person to engage in the act of giving. It is the "love of humanity" that compels the action.

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The Critical Connection between philanthropy and philanthropic desire

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As a financial advisor, the key is to understand that philanthropy is the strategy, and philanthropic desire is the fuel.

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A purely financial approach to giving (e.g., only looking at the tax deduction) often results in transactional giving that feels empty or is delayed due to decision paralysis. Conversely, a purely emotional desire without a proper strategy can lead to inefficient or ineffective giving.

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Philanthropy Planning TERMS & DEFINITIONS - Frequently Asked Questions about Philanthropy Terms with Definitions

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Core Philanthropic Structures

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• Charitable Remainder Trust (CRT):

  • A tax-exempt irrevocable trust designed to reduce the taxable income of individuals by first dispersing income to the beneficiaries of the trust for a specified period and then donating the remainder of the trust to a designated charity.

• Charitable Lead Trust (CLT):

  • The "opposite" of a CRT. It provides a stream of income to a chosen charity for a set number of years. Once that term expires, the remaining assets are distributed to the donor’s heirs, often with significant gift and estate tax savings.

• Donor-Advised Fund (DAF):

  • A private fund administered by a third party (like a community foundation or financial institution) that allows donors to make a charitable contribution, receive an immediate tax deduction, and then recommend grants from the fund over time.

• Private Foundation:

  • A non-profit organization typically established by an individual, family, or corporation. It is funded by private sources and managed by its own trustees or directors to support charitable activities.

• Public Foundation:

  • Unlike a private foundation, this is a registered charity that receives funding from various unrelated donors. They often sponsor Donor-Advised Funds (DAFs) and focus on granting to other charities or community-specific needs (e.g., a hospital foundation or community foundation).

• Community Foundation:

  • A specific type of public foundation that pools the charitable gifts of many donors to create permanent endowment funds for a particular geographic area. They are often the "engine" behind local DAFs.

• Charitable Gift Annuity (CGA):

  • A contract between a donor and a charity. The donor makes an irrevocable gift of cash or securities, and in return, the charity provides a guaranteed fixed income for life. Upon the donor's death, the remaining principal stays with the charity.

• Pooled Income Fund:

  • A vehicle where multiple donors contribute to a fund managed by a specific charity. Each donor receives a proportional share of the fund's income for life. After the donor’s death, their portion of the principal is transferred to the charity.

• Qualified Donee (Canada):

  • A specific CRA (Canada Revenue Agency) term for organizations that can issue official donation receipts. This includes registered charities, but also extends to Canadian municipalities, the UN, and certain universities outside Canada.  

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Legal & Transfer Instruments

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• Bequest:

  • A specific gift of assets (cash, property, or securities) named within a Will that is transferred to a charity upon the donor’s death.

• Codicil:

  • A legal document that acts as an amendment to an existing Will. It is often used to add a charitable beneficiary without rewriting the entire Will.

• Endowment:

  • A fund where the principal amount is invested and held in perpetuity, while only the investment income (or a small percentage) is spent for charitable purposes.

• Life Insurance Gift:

  • An arrangement where a donor names a charity as the beneficiary of a life insurance policy, or transfers ownership of the policy to the charity, providing a significant future gift for a relatively small premium cost.

• Beneficiary Designation:

  • A legal provision in a contract (such as an RRSP, RRIF, or TFSA) that allows the owner to name a charity to receive the assets directly upon their death, bypassing the probate process.

• Deed of Gift:

  • A formal legal document used to transfer ownership of a specific asset (like a piece of fine art or real estate) from a donor to a charity during the donor's lifetime, providing evidence of the transfer for tax purposes.

• Gift Agreement:

  • A negotiated contract between a donor and a charity that outlines the terms of a gift, specifically how the funds will be used, any naming rights, and the responsibilities of the charity in managing the gift.

• Letter of Intent (LOI):

  • A non-binding document that outlines a donor’s philanthropic wishes. While not legally enforceable like a Will, it provides crucial guidance to executors and charities on how the donor wants their legacy handled.

• Power of Attorney (Philanthropic Clause):

  • A specific provision within a Power of Attorney document that grants the appointed attorney the authority to continue the donor’s historical charitable giving patterns if the donor becomes incapacitated.

• Remainder Interest:

  • A legal term referring to the "leftover" interest in a property or trust that is transferred to a charity after a prior interest (such as a life estate) has ended.

• Successor Advisor:

  • A person named in a legal document (common in Donor-Advised Funds) who is appointed to take over the "advisory" role and recommend grants after the original donor passes away.

• Trustee:

  • The individual or corporate entity legally responsible for managing the assets held within a trust (like a CRT or CLT) and ensuring the charitable objectives are met according to the trust deed.

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Tax & Valuation Terms

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• Charitable Tax Credit:

  • In Canada, this is a non-refundable credit used to reduce the amount of tax you owe based on the value of your charitable donations.

• Fair Market Value (FMV):

  • The price an asset would sell for on the open market. This is the standard used to value non-cash gifts (like real estate or art) for tax receipting purposes.

• Gifts in Kind:

  • A donation of tangible property other than cash, such as securities, real estate, or equipment.

• Capital Gains Exemption:

  • In many jurisdictions, donating publicly traded securities directly to a charity eliminates the capital gains tax that would have been owed if the stocks were sold first.

• Split-Receipting (Advantage):

  • The method used to calculate the eligible amount of a gift when the donor receives something in return (an "advantage"). The receipt is issued for the Fair Market Value (FMV) of the gift minus the FMV of the advantage (e.g., if a $100 gala ticket includes a $40 dinner, the receipt is for $60).

• 75% Annual Income Limit:

  • Generally, the maximum charitable tax credit you can claim in a single year is limited to 75% of your net income. Any excess can be carried forward for up to five years.

    • Note: In the year of death and the preceding year, this limit increases to 100% of net income.

• Carry-Forward Period:

  • The window of time (usually 5 years) during which a donor can apply "leftover" charitable credits that couldn't be used in the year the gift was made because they exceeded the income limit.

• Ecological Gift:

  • A donation of "ecologically sensitive" land or a conservation easement to an environmental charity. These gifts offer a 0% capital gains inclusion rate and can be claimed against 100% of annual income (with a 10-year carry-forward).

• Certified Cultural Property:

  • Art or artifacts deemed of "outstanding significance" by the Canadian Cultural Property Export Review Board. Like ecological gifts, these are exempt from capital gains tax and can be claimed against 100% of income.

• Deemed Fair Market Value Rule:

  • An anti-avoidance rule that applies if a donor gives property they acquired recently (usually within 3 years). In these cases, the gift's value for tax purposes is limited to the donor's cost rather than its current Fair Market Value.

• Disbursement Quota:

  • The minimum amount a registered charity is required to spend each year on its charitable activities or grants. This ensures that tax-receipted donations are actually used for their intended purpose in a timely manner.

• Graduated Rate Estate (GRE):

  • A specific type of estate that exists for up to 36 months after death. Having GRE status provides much greater flexibility in "backdating" charitable tax credits to the deceased's final two tax returns.

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Strategic Roles & Concepts

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• Inter Vivos Gift:

  • A gift made during the donor's lifetime (as opposed to a gift made through a Will).

• Testamentary Gift:

  • A gift that occurs after death through the instructions left in a Will or trust.

• Philanthropic Advisory:

  • The process of consulting with experts to align a donor’s financial goals with their social impact goals.

• Designated Gift:

  • A contribution made with the requirement that it be used for a specific program or purpose within the charity, rather than for general operating expenses.

• Donor Intent:

  • The specific purpose, values, and instructions a donor establishes for their gift. Protecting donor intent is a primary goal in estate planning to ensure that a charity or foundation doesn't drift from the original mission after the donor passes away.

• Mission Drift:

  • The gradual shift of a charitable organization or foundation away from its original purpose. Strategic planning often includes "guardrails" (like a Mission Statement or Letter of Wishes) to prevent this over time.

• Cy-près Doctrine:

  • A legal principle (meaning "as near as possible") that allows a court to amend the terms of a charitable trust or Will if the original purpose becomes impossible, impractical, or illegal to carry out. This ensures the funds still serve a similar charitable intent.

• Impact Investing:

  • The practice of making investments in companies, organizations, or funds with the intention to generate a measurable social or environmental impact alongside a financial return. This is often done through a Private Foundation or DAF.

• Venture Philanthropy:

  • An approach to charitable giving that applies the principles of venture capital such as long-term funding, board involvement, and performance measurement to help non-profits scale their operations.

• Social Enterprise:

  • A business model used by some charities where they sell goods or services to fund their social mission. Donors may strategically choose to support these to help a charity become more self-sustaining.

• Succession Planning (Philanthropic):

  • The process of identifying and preparing the next generation (or professional trustees) to take over the management and advisory roles of a family foundation or Donor-Advised Fund.

• Collaborative Philanthropy:

  • When multiple donors pool their resources, expertise, and networks to tackle large-scale social issues that would be too complex or expensive for a single donor to address alone.

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Servicing clients in the areas of wealth, estate, retirement, and tax strategies in the following cities:

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Philanthropy with Philanthropic Desire in Fort Erie, Ontario 

Philanthropy with Philanthropic Desire in Niagara Falls, Ontario 

Philanthropy with Philanthropic Desire in St. Catharines, Ontario 

Philanthropy with Philanthropic Desire in Welland, Ontario 

Philanthropy with Philanthropic Desire in Wainfleet, Ontario

Philanthropy with Philanthropic Desire in Port Colborne, Ontario 

Philanthropy with Philanthropic Desire in Grimsby, Ontario 

Philanthropy with Philanthropic Desire in Niagara-on-the-Lake 

Philanthropy with Philanthropic Desire in West Lincoln, Ontario 

Philanthropy with Philanthropic Desire in Pelham, Ontario 

Philanthropy with Philanthropic Desire in Thorold, Ontario 

Philanthropy with Philanthropic Desire in Hamilton, Ontario 

Philanthropy with Philanthropic Desire in Waterdown, Ontario 

Philanthropy with Philanthropic Desire in Burlington, Ontario 

Philanthropy with Philanthropic Desire in Oakville, Ontario 

Philanthropy with Philanthropic Desire in Brampton, Ontario 

Philanthropy with Philanthropic Desire in Mississauga, Ontario 

Philanthropy with Philanthropic Desire in Toronto, Ontario 

Philanthropy with Philanthropic Desire in Greater Toronto Area 

Philanthropy with Philanthropic Desire in Barrie, Ontario 

Philanthropy with Philanthropic Desire in Alliston, Ontario 

Philanthropy with Philanthropic Desire in Innisfil, Ontario 

Philanthropy with Philanthropic Desire in Niagara Region, Ontario 

Philanthropy with Philanthropic Desire in Halton Region, Ontario 

Philanthropy with Philanthropic Desire in Peel Region, Ontario

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To discuss further or for questions of clarification please contact Mark Albert, CEA, EPC at either:

416-659-6655 or markalbertpfs@gmail.com.

• Proud member of Estate Planning Council of Canada, within Niagara Region​​​

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