Philanthropic legacy

Manitobans are a generous lot, with Statistics Canada data showing, per resident, the province has the highest level of donations.

Certainly, the holiday season has many making donations to charities close to their heart. Besides helping others, another benefit for donors is the federal and provincial tax credits that can be as high as 50.4 per cent, depending on taxable income.

For individuals with taxable windfalls this year — a large bonus from work or the sale of non-registered investments or a business — the credit can be claimed up to 75 per cent of net income in a given year, with excess amounts allowed to be carried forward for five years to use against future taxable income.

Some families have so much to give they set up foundations, which allows them to provide grants to charities on an ongoing basis. But another option exists for families with substantial sums to donate. They may not have the millions to support a private foundation or maybe they do not want to deal with the administrative requirements of running one.

Enter donor-advised funds often offered by foundations, including the Winnipeg Foundation, and increasingly by financial institutions.

“When you put the money into a donor-advised fund, the donor is still able to direct where that money goes so long as it goes to a registered charity,” says Christine Van Cauwenberghe, head of financial planning at IG Wealth Management.

Like many other financial institutions in Canada, IG Wealth offers donor-advised funds that can be started with a minimum $10,000 donation. Others may have higher minimums like $25,000.

“You could create a donor-advised fund where you pay out five per cent,” Van Cauwenberghe.

The benefits are many, including the ability for individuals who have substantial taxable income to donate this year, for example, even though they are not sure what charity/charities to support.

“Instead of having to decide where the money is going to go, the donor-advised fund allows you to set it aside, get the tax credit, and then decide later where the money can go,” says Karen Sparks, director of advisory philanthropic services at BMO Private Wealth, which offers donor-advised funds.

Donors don’t own the donated money, but they still have the ability to determine how much is donated annually and the recipient charity.

Many public foundations offer donor-advised fund programs, allowing individuals and families to implement more long-term philanthropic strategies. Among them is MakeWay, a national public foundation which has a presence in Winnipeg, focusing on social, environmental and economic justice initiatives, including food security in rural and northern communities.

“We have a very immersive, relational engagement with fund advisors, and that’s what people are often coming to us for,” says Lee Burton, director of philanthropic services at MakeWay, which has about 140 advised funds worth $50 million to $60 million, providing millions in support each year for several programs.

Working with other organizations — including foundations — MakeWay supports various projects across Canada, including the Northern Manitoba Food, Culture and Community Collaborative.

Central to the public foundation’s focus is providing what its charitable partners need in any given year, a bottom-up approach opposed to a top-down, which other foundations may have whereby they designate money for specific purposes (i.e. research on prostate cancer).

As well, donors can grant their money to any charity, and even direct MakeWay to give all the funds away in a given year, Burton says.

Increasingly popular, donor-advised funds amounted to $8.2 billion in assets under management in 2024 among those offered by financial institutions in Canada alone, with a 24 per cent annualized growth rate, a recent report from Veritas Charity Services Inc. notes.

Sparks adds BMO’s donor-advised fund has grown 700 per cent in the last five years with the accounts’ sizes ranging from $25,000 to $50 million.

And donor-advised funds are not without drawbacks. Individuals often cannot determine how the assets are invested, for example, once they put it into the donor-advised fund. And when combined with foundations, these funds represent tens of billions of dollars in assets under management that, while providing sustained support to many charities, may not be as effective as donating directly to a charity.

Put another way, it may be more impactful to donate $5,000 to five different charities in a given year than to create a donor-advised fund with $25,000 that donates $1,000 to $2,000 to a selected charity each year in perpetuity.

Still, donor-advised funds can be a good short-term parking lot for individuals making a large donation and wanting to get the credit this year when taxable income is high, Sparks says. “And then you can think it through where you want to give it the following year.”

If you’re fortunate enough to have a taxable windfall this year and thinking a donor-advised fund may be a good fit, act quickly, Sparks adds.

Many foundations have deadlines for mid-December, she says.

“There’s probably still time,” she says, adding each program is different. “Just don’t leave it till the end of December if you need to do it for the 2025 taxation year.”

Joel Schlesinger is a Winnipeg-based freelance journalist

joelschles@gmail.com