My strategy for charitable giving

One of Newport’s guiding principles of wealth management is to share best practices with our clients. Charitable giving is important to many of our clients, some whom have undertaken amazing charitable projects over the years. Some give directly to charities and others have established private foundations for larger amounts ($5 million or more) or use community foundations or Donor Advised Funds as vehicles through which to support charitable activity.

Last year, my wife and I established a Donor Advised Fund through Canada Gives to provide ongoing support to various charities in conjunction with our direct giving. We did this both to formalize our charitable giving and provide a framework to engage our adult children in the process.

Our children are in the midst of building families and careers, juggling the many financial obligations of young adults. As parents, always in search of a teaching moment, we wanted something to remind our kids of the needs of others. A Donor Advised Fund works perfectly to achieve this objective.

I was able to transfer units in one of our Newport funds with an accrued capital gain to our Donor Advised Fund resulting in five important benefits. I received a tax credit for the value of the units; the tax on the capital gain was sheltered; Newport continues to manage the funds less the annual charitable contributions (at least 3.5% of the fund per year – “disbursement quota”); we have formalized our giving for now and in the future; and, most importantly, established a vehicle to engage our children in charitable giving.

The Donor Advised Fund was established in time to give it to our children at Christmas last year. Each family was to research and present their case on one deserving charity to which this year’s disbursement quota would be given. We held a family dinner this summer and listened to each family present a thoughtful case on a cause that is meaningful to them.

It turned out to be much more than just a teaching moment; and is an exercise we all agreed to repeat annually.