Christopher Richardson - Public vs. Private Foundations & Charitable Gift Planning

2. Creating Your Enduring Legacy --
utilizing a DAF or a Private Foundation.
[and other gift planning matters of interest]
Christopher JK Richardson, FCA
Charitable Gift Planning Consultant and Philanthropy Advisor, Vancouver.
Estate Planning Council of Abbotsford
Wednesday, February 16th, 2011 [noon]

3. Overview
• opening comments …
• your place …
• the choice(s) …
• background, terminology and definition.
• historical perspectives.
• recent experience.
• a variety of choices - categories.
- components.
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4. Overview (2)
• a variety of choices - categories.
- components.
• one gift planner’s view –
• the answer,
• trends
• learnings and the ultimate learning,
• the numbers,
• what’s next
• everything else
• concluding remarks, questions and comments.
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5. Overview (3)
additional materials –
– the gift option continuum,
– list of DAFs ( current list, available on request )
– ‘donor-centred’ holistic approach,
– decision-tree,
– matters to consider,
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6. Opening Comments
• how times change but needs do not,
• ‘smart’ (comfortable) fundraising is even more
important,
• when you ASK for money… you get advice –
key now is stewardship of donors and friends ---
ASK for advice and you are liable to get money.
• LET the journey begin … … … … … …
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7. your place …
… as a trusted advisor
•it is imperative that when dealing with each of the
various transactions with each of your clients that
you look & listen for the obvious and subtle
‘charitable hints’ and philanthropic ‘door openers’
…..
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8. the choice(s) …
• direct giving,
• indirect giving utilizing
– a donor advised fund (DAF) and / or
– a private foundation.
• Remember – when in doubt, we do nothing …
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9. DAF Background --Terminology
BEWARE -- depends upon who you are …
• donor-advised funds = DAFs
 traditional term, preferred by community
foundations (cfdns)
• charitable gift funds = CGFs
 preferred by new non-cfdns
• ‘commercial’ gift funds = CGFs
 used by ‘some’ to refer to recent offerings.
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10. Background -- A ‘working’ definition
• a ‘separate’ fund operated within a public
foundation that permits advise on
distributions / grants to other charities [qualified
donees],
• 3 areas of advice / recommendation –
– advice on grant distribution,
– ability to name advisor,
– ability to advise on asset mix or other matters such as
succession.
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11. Background -- A fine line … …
according to CRA,
• ‘primary concern with DAFs is that , if too
much control is retained by the donor, they will
not be considered a gift-at-law, and could not be
receipted’,
• ‘… need to be careful and warn donors that
input by the donor is of an advisory nature only’,
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12. The American Experience
• DAFs began as an offering of Cfdns,
• Fidelity established in 1965 and by mid-90’s
impact caused calls for definition & regulations,
overall, emerging positive and accepting attitude
towards DAFs,
• DAFs removed from IRS “Dirty Dozen” List of
Tax Scams,
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13. The American Experience (2)
• short-fall seems to focus on lack of ‘localized’
granting advice,
• reductions in fees and reduced ‘entry’ amounts
have occurred recently to continue growth.
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14. The Canadian Experience
• Community Foundation (Cfdns) and other
DAFs have existed – most religious,
• initial ‘apoplectic’ response to possible ‘Fidelity
North’ replaced by one of cooperation,
• initial response by CRA-CD to DAF was
‘cautious’,
• new DAFs identified in the last 24 months, and
• on-line option now in beta -- CHIMP.
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15. Categories of DAFs (1)
• charities
– community foundations (geographical),
– faith-based, example various Jewish cfdn (geographical), national
– specific, ex. SickKids, Toronto General and Western Hospital
Foundation,
– specific ‘area of interest’, ex. environmental, social justice,
medical and women,
• financial institutions,
– ‘pure’ DAFs and
– other ‘alliances’ / ‘private label’ /’white label’ and ‘referral’ arrangements,
• investment dealers,
• investment counselors,
• other independent ‘enablers’, and
• a recent on-line option.
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16. Categories of DAFs (2)
• another way to classify –
– general,
– retail,
– ‘boutique’ / ‘specialty’ / ‘targeted’.
• ‘longevity’ – endowment / gift fund / hybrids.
• another way – ‘motivation’ –
– ‘philanthropic service’, or
– ‘product’.
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17. 17

18. Main Components
of a DAF and a private foundation
A variety of options exist –
• establishment,
• investments – what and by whom,
• granting and
• administration, stewardship, fees and
compliance and philanthropic advice.
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19. Key Components
• initial capital
• additions,
• restrictions upon treatment of contributions
-- no longer apply – was flow-thru and 10-year,
• ability to choose advisor,
• ability to ‘influence’ investment mix,
• availability of ‘localized’ granting advice,
• distribution rate,
• minimum grant amount,
• ability to grant capital,
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20. Key Components (2)
• transfer now or later to charity or private foundation,
• succession – limited or not,
• ‘default’ use of funds,
• various fees,
• reporting,
• newsletters and briefings,
• availability of philanthropic advice,
• governance.
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21. the answer
• it depends …
• are the initial and on-going costs justifiable ?
• quantum, timing and type of asset(s) to be
gifted,
• other motivations – desire to be involved with
the details …
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22. Trends
• increased flexibility as rigid limitations are being
re-examined,
• increased communication and stewardship -
newsletters,
• fees are being reexamined -- ‘ala carte’, some
‘nuisance’ and some posted ‘fees’ are not being
implemented,
• transitional flexibility being offered to allow for
future and change of circumstance.
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23. Learnings
• continued growth -- attracting new funds,
• attracting philanthropic, ‘self-reliant’, ‘tax-avoidance’
individuals,
• opportunity to expose philanthropy to new individuals,
• some cfdns are offering to permit you to retain existing
advisors,
• call for flexibility is causing some to reexamine business
model to avoid any ‘shaking out’.
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24. 24

25. the Ultimate Learning
• the proliferation of DAFs has served as a ‘door
opener’ ……
– for charities,
• to advance / begin an on-going relationship.
– for financial institutions / investment dealers and
counselors and others,
• to enhance on-going relationships.
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26. 26

27. the numbers
THE main difficult issue with DAFs is (still):
 Fees no it is Commissions,
and their impact upon
allocatable / spendable amounts.
• once the issue of remuneration is resolved the question
is whether the net distributions to charities will provide
a sustainable ‘business model’ for all the DAFs?
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28. DAFs
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29. 29

30. What’s NEXT
• undoubtedly MORE retail DAFs in the longer-term,
• increased flexibility to address personal interests of
donors (now and in the future),
• after initial period, lower fees and lower minimums to
sustain growth in the ‘retail’ sector,
• need to measure actual impact of DAFs
-- by whom,
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31. What’s NEXT (2)
• creation of ‘strategic’ partnerships to obtain necessary
community linkages,
• face-to-face opportunities to assist and
complement on-line resources,
• strong attempts by commercial DAFs to demonstrate
relevance & cost/benefit (defensive).
• And maybe a ‘back-room’ private foundation service-provider.
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32. Everything else
• the end of the ‘downturn’ and its impact as we move
forward … what did we learn …
– time for long suggested donation ‘stimulus’ provisions ?,
• 2010 budget and impact of reduced dq requirements,
and the new T3010 A, B and -1
• new(ish) audit regime,
• on-going CAGP*ACPDP CRT proposal to Finance,
• a charity flow-through ltd ptnership – ‘to not audit’,
• other stuff ….
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33. Concluding comments, questions
and input …… Thanks.
• philanthropic exposure is always good as long as
it is based upon knowledge and results in a
positive experience for the donor, the charity
and the community,
• ONLY TIME WILL TELL……. thank you.
• as we move forward ….
how can I / we improve this ‘journey’.
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34. Christopher JK Richardson, FCA
Charitable Gift Planning Consultant &
Philanthropy Advisor,
2792 West 15th Avenue,
Vancouver BC V6K 2Z8
 Telephone: (H/O) (604) 739 – 4756
(H) (604) 731 – 4781
(Cell) (604) 218 – 0981
 FAX: (604) 731 – 4721
 Email: chrisgiv@direct.ca
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35. 35

36. Additional materials --
These slides are not included as part of the actual
presentation
but may be referred to……
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37. Cash (A),
Gifts in Kind including
• Publicly traded securities including ‘listed’ securities (A),
•
• Appreciated and / or Depreciated property (B),
•
• Principal Residence (B),
• Non-qualifying and ‘excepted’ shares (C),
• the rest (C).
•
Charitable Life Insurance policies (A),
OUTRIGHT Charitable Remainder Trusts (B),*
Interest-free Loans (B),
*** Endowments/Donor Advised Funds/Private Foundations ***
Charitable Gift Annuities (A),
DEFERRED Certified Cultural Property (?),
Ecological Sensitive Land (?),
Residual Interest Gifts (B),
Retirement / Savings Plans (A)
THE GIFT OPTION CONTINUUM
Bequest (A).
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38. A DAF within a ‘donor-centred’
holistic approach
Hopefully, discussions will be –
– creative,
– comprehensive within a comprehensive investment / estate
‘plan’,
– realistic,
– timely ( donor’s time ),
– professional,
– tax-effective (as distinct from tax minimized),
– understandable and
– with integrity.
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39. The decision-tree =
the gift planners “value-added”
without a thorough examination of the donor’s
circumstances along with an identification of
future possibilities
MATCHED with a thorough knowledge of the
features of each gift ‘structure’,
-- an informed decision cannot be made.
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40. Matters to Consider
in summary –
• ability to create personal / family foundation,
• any overriding decision factors,
• timing of recipient identification decision,
• necessary comfort level,
• timing of impact of gift – now, over time,
• quantum of giving, now and later,
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41. Matters to Consider (2)
• type of assets available to be gifted,
• how involved do you and your family want to
be, now and later?
• how much guidance do you need in the areas of
–
– investment decisions,
– granting and philanthropic advice, and
– compliance support,
• what ‘structures’ would be acceptable,
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42. Matters to Consider (3)
• costs, fees and expenditures,
• contact(s) -- DAF people, investment advisors &
reps, salesmen and gift planners,
• face-to-face access to knowledge and experience
with your ‘local’ charitable community,
• the paper work and compliance.
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