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Philanthropic Reflections – Giving of Head and Heart

Photo by Grant Monck

Giving of Head and Heart – Donations of Cash and Non-Cash assets 

When you financially support a charity, it is a combination of what your head thinks you can practically give and the passion in your heart to support causes you care about deeply. Canadians are a generous people who support many causes. Throughout most of our history, donations have usually been based on cash on hand whether you give at the door, on-line or in response to a major gift solicitation.  The challenge for charities is to unleash the wealth of non-cash assets that Canadians hold to benefit Canadian society with substantial tax benefits for donors.

Tax incentives for gifts of non-cash assets 

When I started my fundraising career in 1995, donations other than cash were fairly uncommon in Canada. Then in 1996, changes to the Income Tax Act began to increase tax incentives for Canadians to donate gifts in addition to cash.  There was now great potential for Canadians to support the charitable sector through gifts of non-cash assets.

At a recent AFP conference, I spoke on the topic of gifts of assets. For the presentation, I reflected on my twenty years of working with donors and their advisers, and my more recent work as a consultant with a wide range of Canadian charities.

The opportunities for Canadians to gift non-cash assets are great but the majority of Canadians and charities are not reaping the benefits. Why is this the case and what may be done?

On the positive side, many Canadians now take advantage of tax incentives for gifts of publicly listed securities. This type of gift is promoted by the charitable sector and understood by most advisers benefiting many charities and donors. But the tax benefits of most gifts of non-cash assets remain greatly underutilized.  This is unfortunate based on the increased competition among charities to raise funds and the reduced revenues of many charities that hamper fulfilling their missions.

Many charities continue to rely on traditional funding from corporations, foundations and governments with mixed results. I find this surprising since the greatest source of charitable donations may be found with individuals and the non-cash assets they hold. More and more charities are running after a smaller funding pie of cash each year.  Board members and senior staff across the country are working very hard to maintain current revenues, let alone increase resources to move their missions forward. In my view there is a major problem in 2016 with a traditional funding model for major gifts that relies heavily on the cash Canadians have on hand. 

How are professional advisers fairing with their high net-worth client base in discussions on charitable giving? A recent survey of advisers and clients across Canada, entitled The Philanthropic conversation – Understanding Financial Advisors’ Approaches and High Net Worth Individuals’ Perspectives showed an apparent divide between what advisers believe they are discussing with their clients regarding charitable giving and what their clients are hearing and wish to hear. From this survey, the focus of advisers appears to be on wealth preservation rather than developing meaningful strategies for charitable giving based on the asset base of each client.

What can be done to further promote gifts of non-cash assets in Canada?

(1) More advocacy and education of advisers, charities and donors is needed regarding the benefits of donating non-cash assets;

(2) While charities need to maintain current sources of support in the short term, there should be a shift in approach and resources over time from a reliance on institutional donors to individuals and their non -cash wealth; and

(3) Staff and volunteers involved in fundraising need to be better trained to solicit donations from individuals based on their entire asset base.

It is not easy for charities to depart from their reliance on traditional methods of fundraising or advisors to expand planning discussions beyond increasing wealth. These approaches still have a place in Canadian philanthropy and financial planning. It does appear that the survival of many charities in Canada calls for changes in how major gifts are solicited and the types of discussions both advisers and charities have with individuals regarding philanthropy. The passion of Canadians to support the charitable sector continues and the tax tools are in place to discuss donations of non-cash assets with individuals, couples and families across the country by professional advisers and charities.