A Charitable Guide to Planned Giving

A "Get-To-It" Guide by DeWayne Osborn CPA, CGA, CFP®

Getting Started

1.4 - Reasons for Making a Gift

Title: Reasons for Making a Gift:

Why anyone would give to charity still (and probably always will) remains a very personal, individual thing. While it is impossible to absolutely conclude why people are making planned gifts, here are some very likely factors:

1. Long Term Commitment to the Charity:

In my opinion and experience, there is no other single factor more important to the success of a planned giving program than committed donors. This is why planned giving programs should be attempted only in established charities. Young charities may be doing great work, but they have not had the time to build such commitment from hundreds or thousands of committed donors. With planned giving, the saying "build it and they will come" does apply. That is why it is a waste of valuable time and resources for the charity's planned gifts officer or representative to be on the frontlines describing the charity's good works. That crucial piece of the puzzle must be in place before a planned gifts program will bear fruit!

2. Intergenerational Transfer of Wealth.

Another indirect reason or "trigger" for making a planned gift is the enormous accumulation of wealth in the hands of Canadians over the age of 55. In many cases, these individuals are being told by their financial advisors to consider making charitable gifts to help offset the tax "bite" on their estate. You see, in Canada, when a person dies, everything they own is deemed to be disposed for tax purposes. Therefore, they will most likely have their largest taxable income in the year of death. When told that approximately 50% of their estate's income will be paid in taxes, the charitably inclined person may (but not always) make arrangements for a planned gift to his or her favorite charities.

3. Legislative Changes:

Another reason for the growing popularity of planned giving is the abundance of legislative changes that continue to make it easier than ever for donors to leave a planned gift. While a detailed discussion of this topic is covered in the budgetary sections that follow, suffice it to say that governments have recognized the value in private donations. As recently as the Budget of 2006, governments continue to make legislative changes designed to encourage more giving to public charities.

4. Matching Funds:

A more recent phenomenon is the provision of matching dollars from provincial governments or larger charities for certain types of charitable gifts. For example, the Manitoba Government's Scholarship and Bursary Initiative provides tax dollars for certain post-secondary institutions to use for matching private and corporate donations that are directed for scholarships or bursaries. The terms of the match (what amounts qualify, how much to match, etc.) depend on the recipient institution; however, it is not uncommon to see 2:1 ($1.00 donated is matched by the charity or government with an additional $.50) or even 1:1 matches.

5. Want to Leave a Legacy (Endowment Funds):

Planned gifts are natural endowment fund builders. Why? In many cases, there is no requirement for the charity to spend 80% of the receipted (eligible) amount of the gift in the next fiscal period. Therefore, the charity can invest the gift and earn income which is tax free to it, yet can be used to fund the donor's wishes, or the institutions priorities forever. It is important to note that the charity pays a price for this freedom. That price is the development and maintenance of adequate books and records so the charity can track the donations over long periods of time (e.g, decades) - a process that is inherently difficult if not impossible for a volunteer to manage. Hence professional staff are required.

Click here for a brief history of the endowment fund (pdf file)

Keywords: budget, deemed, endowment, intergenerational, matching, matching funds, trigger