Planned giving is an important way to show what is important to you, a chance to tell your story and a way to promise progress to future generations.
Guest blogger Girish Agrawal explains the importance of a charitable giving plan.
You want to give back to your favourite charities and create a lasting legacy of charitable giving. Your philanthropic intentions are commendable – and one of the easiest ways to realize them is through a donor advised fund.
Donor advised funds are an efficient means of donating to your charities, offering many of the benefits of a private foundation but without the administrative costs, restrictions and responsibilities of a foundation.
To establish a donor advised fund, you create a donor-advised investment account through the financial services organization of your choice. Your contributions are invested in an eligible mutual fund and grants are made from your account to your favourite charities or other permitted entities.
When you establish the investment account, you select the charitable organizations or causes your fund will support, you retain the right to advise the fund on how your account’s income is to be allocated, and you will receive an immediate tax receipt for your contributions. Once you choose to establish your fund, this is the basic process:
1. You make an initial contribution of a significant lump sum, or allocate an insurance policy with a net death benefit in the amount you have determined is appropriate. Your contribution is made to a charitable giving foundation, which is registered under the Income Tax Act as a public foundation.
2. You receive an immediate tax receipt equal to the fair market value of your initial donation.
3. You can name your fund account after yourself, your family, a loved one, a company, or a special interest. (For example, The John Smith Charitable Account or The Smith Family Fund.)
4. Your contribution is invested in an eligible mutual fund managed by investment professionals.
5. Each year, you are advised about the amount that is available in your fund account as a grant to your charities. This is normally between 3 per cent and 5 per cent of the value of your account – so, if you had $100,000 in your account, you might be advised that there is $3,500 available as a grant.
6. You then recommend which charities should receive the available grant amount. Your grants must go to registered Canadian charities.
A donor advised fund offers incredible flexibility when it comes to philanthropic planning – and it may be the ideal choice for you. But to be sure it is and that your charitable giving intentions fit in with your overall financial and estate plans, talk to your professional advisor first.
This column is written by Girish Agrawal, founder of Agrawal Associates and a Senior Executive Financial Consultant at Investors Group Financial Services Inc. This article presents general information only and is not a solicitation to buy or sell any investments. Contact a financial advisor for specific advice about your circumstances.
To learn more about the different ways you can leave a lasting legacy and reach your philanthropic goals, please contact the Alberta Cancer Foundation gift planning specialist at (780)643-4662 or Girish’s office at (403) 253-4840 or visit www.girishagrawal.com.
~ Guest Blogger