Mackenzie launches charitable giving fund

If a recent survey conducted by Decima Research and Mackenzie Financial is any indication, the majority of your clients don’t know about recent federal government changes that allow taxpayers to donate securities to charity and pay no capital gains tax. Mackenzie though expects charitable giving awareness to grow, and hopes to facilitate the movement, and cash in, by offering advisors new tools and incentives to get involved.

It seems there are very good reasons to get involved. The poll of 1,040 Canadians found that survey respondents would donate an average of $117,000 to charity if they won a million dollars. The most generous givers are those between the ages of 18 and 24 years, who say they’d donate an average of $156,000. Along with these figures, the survey found that 86% did not know about recent budget changes that give preferential tax treatment to donations of publicly listed securities, 33% said they feel they do not donate enough to charity and once the tax exemptions for donated shares were explained to them, 41% said the changes would have some kind of impact on their charitable giving habits.

All of these present significant tax planning and relationship building opportunities for advisors since a donation of appreciated shares can many times be a more efficient way to donate, rather than giving from the family’s after tax cash flow.

Although many are missing the opportunity now, Brad Offman, assistant vice president, strategic philanthropy for Mackenzie Investments says he expects awareness about charitable giving in Canada in increase, particularly with the launch of the fund company’s new program.

The Mackenzie Charitable Giving Fund allows philanthropically inclined clients to set up an account with the company, name it, and make donations of cash, securities and insurance, and obtain a tax receipt for their donations. Donations are then invested in one of seven Mackenzie mutual funds, which in turn generates an income that clients can direct to their favourite charities each year. Funds in the program continue to pay trailer fees to the advisor for the assets under management in the fund. The program is modeled after several existing community donor-advised funds and commercial funds like the Fidelity Charitable Gift Fund for advisors and clients in the U.S.

For the hands on client, those interested in getting the family involved in charitable giving decisions or leaving a legacy, the program is particularly attractive. Once the initial donation is made, roughly 3% to 5% of assets in the client’s fund will be available for granting each year. Both the donor and the donor’s advisor will receive semi-annual reporting about the fund. Donors can name a successor to assume the responsibility for annual granting recommendations or provide standing recommendations that name specific charities to receive grants from the fund into the future.

“The perception is that you have to be a millionaire to be a philanthropist, but that’s simply not the case; with the Mackenzie Charitable Giving Fund you get benefits similar to your own private foundation for as little as $25,000,” says Offman. The minimum grant amount is $500 per charity.

For tax purposes the company has set up the Strategic Charitable Giving Foundation, a non-profit charitable organization registered with the CRA as a public foundation under the Income Tax Act. The foundation has in turn retained Mackenzie to provide administrative support and fulfillment. The minimum initial donation to the program is $25,000. Subsequent donations can be made any time in increments of $5,000.

Mackenzie isn’t the first company to take advantage of Ottawa’s capital gains tax change. In May, RBC Dominion Securities announced a plan that allows clients of the bank-owned brokerage to make ongoing contributions to a fund administered by the Charitable Gift Funds Canada Foundation. Donors receive an official charitable donation receipt for the full market value of their contributions. Gifts of qualifying securities may also be eligible for a capital gains tax exemption.

Filed by Kate McCaffery, Advisor.ca, kate.mccaffery@advisor.rogers.com