Advisors shouldn’t underestimate younger donors.Deagreez/iStockPhoto / Getty Images
High-net-worth clients spend a lot of time deciding how and when to make big donations.
Kelly Cole, as president and chief executive officer of Sunnybrook Foundation, is regularly part of these discussions. Toronto’s Sunnybrook Health Sciences Centre recently received a $41-million gift from the Weston family that will go toward Sunnybrook Clinical Trials.
Globe Advisor spoke with Ms. Cole about charitable giving trends.
How do charitable giving strategies differ today from 20 years ago?
Donors are more intentional and impact-driven in how they approach their philanthropy. [They] want to know how their gift will have an impact. What’s the potential for the impact beyond the Sunnybrook walls? Will it be a lasting impact for the next 20 years? Then, [the charity] will get into dollar amounts and gift structures to say how it can make this happen.
We see more holistic discussions looking at both lifetime and estate planning. If I go back to the early days of my career, we wouldn’t be having those blended conversations.
Finally, the gifts aren’t transactional. They’re about building a trusted relationship with a charitable organization.
How can financial advisors improve their planned giving discussions?
Advisors tend to come at charitable giving discussions from a tax or wealth perspective first. While that makes total sense, I worry that some are not having that values-based conversation in which they’re asking, ‘What are your charitable goals? What are you trying to accomplish?’
When an individual is trying to make a more sizable gift over several years, they need to figure out the best financial scenario to accomplish [giving] the gift. They keep up their annual flow of cash that they need, but also maximize their tax returns.
I also don’t think they see charities as a resource. We can be a resource – obviously, not on tax advice – but understanding the area that the individual is looking to support and understanding the needs of the charity. That impacts how [advisors] might provide advice and support their clients’ charitable gift activity.
What is the most popular way to give?
Wills remain the most common planned deferred gift. The Canadian Association of Gift Planners found that the proportion of Canadians giving to charity via wills has doubled, roughly to 10 per cent from 5 per cent, in just five years.
The other major trend is the shift in [donating] securities. That continues to grow and is a great gift vehicle for many donors.
As people age, they think about giving their registered funds. But in essence, that means cashing them in. It’s best for them to have that conversation with their advisors on tax-advantaged ways of making gifts.
Donor-advised funds definitely have their appeal and function in our sector. They’re becoming increasingly popular for their tax advantages, ability to facilitate philanthropy and lower administrative burden compared with establishing a private foundation.
Insurance, however, remains underutilized despite how simple it can be for donors to make a meaningful charitable gift without revisiting their will. By naming a charity as a beneficiary of an existing policy, or of a registered retirement income fund or registered retirement savings plan, donors can unlock significant tax benefits.
How often do estate issues crop up between charities and family heirs?
I don’t know the percentage, but we have definitely noted an upward trend in estate litigations. Advisors can encourage their clients to have [philanthropic] conversations with their families so they understand their wishes and legacies. That makes families more informed, and it makes for greater transparency and documentation around the intent of gifts.
Does a charity fight back if a family member sues?
Generally, we would lean toward litigation [because] the donor has entrusted us with a commitment. If we are very aware of that commitment and understand what they’re trying to accomplish, then I think as good stewards of the foundation, we want to follow through with what that donor was hoping to accomplish. It comes back to ensuring that there’s good documentation and that families and advisors are both well-informed.
What should advisors know about the next generation of clients and charitable giving?
We are starting to see different generations coming into the conversation. Don’t underestimate the younger donors. There’s definitely a shift in which we’re having legacy conversations earlier in [wealthy] donors’ lives. That might be because millennials learned what their parents did, and that’s being shared between generations. It might also be where advisors are having an impact, having those conversations with their clients earlier on.
This interview has been edited and condensed.