Incorporating charitable giving, estate-planning

Elena Hoffstein is a partner in the law firm Fasken Martineau DuMoulin. In addition to personal tax and estate planning, her practice includes charities and not-for-profit law. This conversation focuses on philanthropy as part of an estate plan.

Brayley: How often do you discuss philanthropy with your clients as part of their estate planning?

Hoffstein: I sometimes raise the topic during the estate-planning process, but more often clients raise it with me and have given their philanthropic aspirations some thought.

Brayley: What motivates people to think about creating a charitable legacy?

Hoffstein: There are different triggers. First, parents want to make sure the family is taken care of, but where there’s significant wealth involved, many don’t want to leave too much to the children—they prefer to see them earn it themselves. Other times, an illness in the family could lead to donations for the medical institution that has helped. And some want to create a lasting legacy in honour of a family member.

Brayley: Have those motivations changed over the last few years?

Hoffstein: As my clients get older, they’re thinking more about charitable giving, and in a more strategic way. I see a definite interest in giving back to the community, not just in dollars, but also by donating their time. The evolution I’ve seen is that as their wealth has grown, more HNW individuals earmark large amounts to charity, often motivated by a concern that they want to leave their children enough to do something with their lives, but not so much that they will do nothing.

The whole not-for-profit sector is also becoming much more sophisticated. This leads to better education of different options for charitable giving, and the charities are working more closely with donors to develop a plan that’s tailored to their desires.

Brayley: What kinds of charitable gifts do you discuss with your clients?

Hoffstein: There are many ways to make donations. Many give cash, of course. Some give assets such as art collections. More people are thinking of designating charities as the beneficiary of a life insurance policy, RRSP or RRIF. There are also other tax- effective strategies for making gifts such as gifts of publicly traded securities.

Brayley: You deal with many high-net-worth individuals who might be thinking of setting up their own charitable foundation. When would you encourage them to do that?

Hoffstein: I usually encourage people to look at alternatives to setting up their own foundation, unless there’s a real commitment and ability to follow through on all the administration that’s required and some thought given to a sustainable succession plan. It’s very time-consuming and can be more expensive to do it all yourself. It’s important for a family to assess the real reasons they want to have a foundation and determine if doing it on their own is the best option.

Brayley: What are the alternatives to a private foundation?

Hoffstein: Establishing a Donor Advised Fund is the best alternative. These are set up under the umbrella of a charitable institution, often a public foundation like a Community Foundation. Donors can be actively involved in advising where they want their grants to be made, and the Community Foundation handles all the administrative and investment management responsibilities in a very cost-effective way.

Brayley: Are you seeing any new trends in philanthropic giving?

Hoffstein: We’re certainly seeing the intergenerational wealth transfer starting to take place.

Anne Brayley is the vice president, Professional Advisory Services at the Toronto Community Foundation.