Helping Canadians find joy in living philanthropy

Philanthropic and legacy planning expert dissects rising charitable trend, and how financial advisors can help maximize impact

Helping Canadians find joy in living philanthropy

Traditionally, people with charitable intentions would express them through wills, philanthropic foundations, and other instruments of legacy planning. But as Canada charts a K-shaped economic recovery from the pandemic, more and more Canadians today are weighing the positives that come with living philanthropy.

“In the past, people saw it in terms of ‘whatever I don't leave to my family, I will give to charity,’” said Marvi Ricker, managing director, Family Philanthropy and Legacy, BMO Family Office. “That thinking has changed for a number of reasons.”

Rising ability and rising needs

One major factor, Ricker said, is that many Canadians have been able to accumulate more savings over the past year and a half. With a bigger buffer of cash to address their immediate expenses and long-term needs, there’s less of the calculated reasoning that keeps people from donating money until after their death, when they’ll personally have no more use for it.

People who give to worthy causes during their living years also stand to experience a certain sense of joy. Because they are around to see the impact of their money and personally get involved, they can get the satisfaction of knowing that they’re contributing to the solution rather than just passively watching society’s problems get worse.

“Around the 1980s, when the basic needs of Canadians started to grow beyond what could reasonably be funded publicly – more students getting post-secondary education, life expectancies were getting longer, and so on – government created incentives for people to give,” Ricker added. “That’s why our tax laws with respect to philanthropy are among the most generous in the world today.”

In the high-net-worth space, there’s also an increasing trend of affluent individuals choosing to hand down a limited amount of their wealth to their successors, as opposed to leaving everything. As a prime example, she noted Bill Gates’s widely reported decision to bequeath $10 million to each of his children – enough to let them do what they want in life without getting spoiled or overwhelmed.

“There are disadvantages to having excessive wealth,” Ricker said. “Not only may they lose their drive, but they may also lose their sense of identity as they attach their sense of self-worth to their being well off.”

Over the decades, she said the needle has certainly moved with respect to Canadians’ charitable activities. Last year, private foundations also loosened their purse strings, raising their disbursement quotas from 3.5% to 5% of their investible assets as they recognized the urgent issues that have arisen or worsened because of the pandemic.

While mental health has always been an issue, she said isolation due to COVID has created a second pandemic of people seeking support for their psychological wellness. The healthcare system is also creaking under the weight of continuing infections and cases of COVID long-haulers, challenging healthcare professionals’ ability to carry on and stay motivated. At the same time, COVID-19 has exposed some inadequacies and vulnerabilities within the long-term care system, leading to a disproportionate number of COVID-related deaths within that segment.

“Another big problem that's emerging is discrimination and hate crimes against Blacks, Muslims, and other disadvantaged groups,” she said. “Since COVID-19 hit, some people have become more glued to social media, and that’s provided more opportunities for some to vent their anger in unhealthy and destructive ways.”

Guiding Canadians on their charitable journey

For Canadians with more wealth at their disposal, the compulsion to spring into action and lend support might be strong. But before they dive in, Ricker encourages would-be philanthropists to consult a financial advisor who can help determine how much they can actually afford to give. Having a financial plan that accounts for their financial goals, both short- and long-term, will give them much more confidence in their decision.

“At BMO, we find that when we do financial plans for clients, they're amazed how much they're going to be worth at age 90 years or beyond,” Ricker said. “They think ‘Well, what am I waiting for? I can afford to give more now.’”

At that point, an advisor can offer valuable guidance on the best approach to take when giving. For instance, while cash donations might be the most convenient approach, she said in-kind donations of appreciated stock may be preferrable; by bypassing capital gains tax that they otherwise would be paying to the government, it allows the donor to get more bang for their charitable buck.

Finally, she said, Canadians should be deliberate about the cause that they want to support. With 86,000 charities across Canada, there’s every chance that someone who tries to support multiple advocacies at one could spread themselves too thin. A good approach, she said, is to identify a cause that’s close to their heart – finding a cure to a disease afflicting a family member, supporting the arts, protecting the environment, or possibly something else – and find one or two organizations that champion that agenda.

“In our work at BMO Group Philanthropic Advisory Services, we try to guide people in creating a mission statement for their giving that reflects their values. We find that it goes a long way toward helping them stay committed and passionate,” Ricker said. “You can’t be something to everyone; to really get the most joy out of giving, I think people have to find something that really resonates with them.”