Where charity begins

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Winnipeg Free Press, Sunday Novenmber 30, 2008
Reproduced with permission.

Betty Edel is not a typical phil­anthropist. A lifelong resident of the inner city, she has no silver spoonful of financial wherewithal to start a foundation to help the causes in which she believes.

No adviser sagely offers up taxation and estate-planning options about how she can maximize her donation while keeping her tax bills to a minimum. There is no plan on how best to maximize her resources to help those she thinks are most in need.

But she is indeed a philanthropist, and when it comes down to it, she does have a strategic plan to give to charity: Give regularly, until it hurts just a bit.

"It was (painful) at first. I have seven grandchildren and two children so I knew when I was giving that something would have to pull back somewhere," she says about recently increasing the amount of money she gives to charity.

By donating monthly to the United Way, Edel is confident her money will be pooled with that of others to bring about real change in the community, and she should know. She's the executive director of Mount Carmel Clinic -- a community, non-profit health-care provider, helping some of the city's most disadvantaged citizens.

You might think that in today's economic climate, Edel's story is a rarity. But it seems when the going gets tough, Winnipeggers start giving.

"When we think people might give less, they actually step up and they tend to rally," the United Way's Scott Sime says.

Manitobans lead the nation when it comes to charitable donations, a recent Statistics Canada survey found, averaging out to about $330 a donor in 2007.

Like Edel, many of us have no concrete plan when it comes to donating to charities. But those who work with helping wealthy individuals and families donate millions of dollars to non-profit organizations say no matter what our net worth, we can all benefit from strategic planning when it comes to charitable giving.

"When people talk about strategic philanthropy, they are talking about people who have a particular interest in a particular cause, and they are thinking about how they can best influence solutions for that cause," says Bruce Boyd, a principle with Arabella Philanthropic Advisors in Chicago. One of the leading non-profit firms in its field, it helps high-net-worth individuals and organizations, including The Bill and Melinda Gates Foundation, plan how best to use funds and resources to tackle a social problem.

Whether the donation is $1 billion or $100, individuals should approach giving as they would investing in their retirement or children's education.

"It's really about doing due diligence," he says "People don't make financial investments without having thought about 'is this area where I think the return will be good, and is this an investment opportunity that's a good one?'"

This involves research, which can be as simple as asking a few questions when someone comes to your door or calls you at home, says Don Bell, a lawyer and wealth planning consultant with Richardson Partners Financial Ltd.

"One of the things I do when people phone me is I usually ask them to send me some literature from the charitable organization. Sometimes, they are professional fundraisers and a lot of the money may not be getting to the end user," he says.

The majority of every dollar donated should go toward helping those who are supposed to benefit from the charity, but you need to ask that question to know for certain, says Bruce Bennett, first vice-president at Richardson, who helps wealthy clients reach their philanthropic goals.

"Where is the money going within the organization? What percentage are their administrative costs?

Individuals who take time to sit down and discuss with their family what charities they would like to support -- with money and/or time -- won't often even need to ask those questions.

"If you have a plan in place, then... you have thought about these things," Bennett says. "You have researched (the charities) and know that your money is going to things that are going to make a difference."

Besides determining to whom to give money, there's also the matter of how much and when to donate. While reducing income tax is rarely the only reason someone donates to charity, it does warrant some consideration. You'll receive a 25.9 per cent tax credit on the first $200 donated, while you will get a 40 to 50 per cent tax credit on donations above that amount.

Securities such as mutual funds, stocks and bonds may also be donated.

"For instance, if you give a qualified security, which has a capital gain on it, which you may be hard-pressed to find this year, there's no inclusion rate for the capital gain," Bell says. "So, you don't pay any tax on the capital gain."

If you were to donate a security with a capital loss, you would still be able to use that lost value to reduce your tax bill, he adds.

Still, tax credits are just positive side-effects and are often lower on the list of why people give. Many would like to see a positive outcome from their donation, and Richardson clients are often encouraged to consider giving now rather than leaving the money to the charity in their wills, Bell says.