November 7, 2023 | Hosted by Leanne Kaufman
Learn ways to include charitable giving as part of your estate plan, providing you the opportunity to give during your lifetime and beyond
"Making sure people know what your intent is, what you're passionate about, what are the things that are important to you, you can't replace that with anything."
Intro Speaker:
Hello, and welcome to Matters Beyond Wealth with your host, Leanne Kaufman, president and CEO of RBC Royal Trust. For most of us, talking about subjects like aging, late life, and estate planning isn’t easy. That’s why we’re going to help get the conversation started on this podcast while benefiting from the insights and expertise of some of the country’s top experts. We want to bring you information today that will help to protect you and your family in the future. Now, here’s your host, Leanne.
Leanne Kaufman:
Winston Churchill was quoted as saying: “We make a living by what we get, but we make a life by what we give.” It’s hard to argue with that sentiment, and we show this through the various ways we give back to our communities–whether that’s our dollars or our time. How can we continue to give back after we’re gone? Philanthropic gift giving as a part of your estate plan is a powerful way to create a lasting legacy.
Hello, I’m Leanne Kaufman, and welcome to RBC Wealth Management Canada’s Matters Beyond Wealth. With me today is Tony Maiorino, Vice President and Director and Head of RBCs Family Office Services at RBC Wealth Management Canada, and a close colleague of mine. Tony leads a team of over 200 professionals with legal, tax and financial planning expertise. He has over 25 years of experience advising high-net-worth clients in Canada. He serves as a member of the RBC Wealth Management Canada Operating Committee and the Wealth Management and Insurance Operating Committee. He’s also a board member for the Yukon University Foundation.
Tony, thanks for being here with me today to talk about wealth planning and philanthropy, and why this matters beyond wealth.
Tony Maiorino:
Thank you, Leanne. It’s a real pleasure to join you today.
I know that philanthropy and charity is a topic very near and dear to you both professionally and personally. Of course, we all know that philanthropy isn’t just for the uber wealthy. In fact, a study we did at RBC recently showed that the younger generations had greater intentions of including charitable giving as part of their own estate plans, but this, as you remember, is also the age group where the vast majority of young people still hadn’t created a Will. So, in your role as a father to kids in this cohort and as an advisor, what advice do you give to the younger generation about why they need a Will?
Yeah, that particular cohort is also the demographic that doesn’t have a Will at all, as you mentioned. So the need to be philanthropic is a great thing for them to want to do, but in the event that something were to happen, they’re not able to see those intent continue on. When I look at my kids, in particular, my daughter who’s my oldest, we had a conversation recently about her intent if something were to happen to her. She was quite surprised at what happens if you pass away without a Will and what happens to your wealth. When it comes to that generation and those individuals, it’s really, really important to have that insight into if you want to see your intent continue on, then you need to do that estate plan, you need to have that Will in place. That’s a conversation that my wife and I have had with all three of our kids who are over the age of 18.
Yeah, and that intention to be philanthropic and to want to see their money do good, even if it’s modest assets to your point, it’s not well understood that there’s no way to fulfill that if they don’t have a Will, right?
Right, my daughter, when I asked her what she thought would happen if God forbid something were to happen to her, she said she thought her money went to the government, and was actually, I think a little more upset when she found out it went to her mother and I rather than going to the government. So she’s now connected and has completed a Will through our partner Epilogue and is really happy with what she’s designed for herself. And that’s something that will evolve as she gets older and makes more money, she can make adjustments and make sure that what she wants to see happen is actually what’s going to happen should that unforeseen event occur.
My daughter’s about to turn 18, and I think I’m going to take the lead of one of my friends and buy her a Will for her birthday, but I’m not sure she’s going to appreciate it. Maybe there’ll have to be something that goes along with it.
Yeah, that’s a great idea actually.
So, if people are still trying to build their wealth—of course, especially those younger adults—what do you and your team advise about how they might balance those competing needs of both building their retirement nest egg and making sure they have what they’re going to need for their own future and also giving back to the good of community?
You use the word there, Leanne, which I think is really, really important, and that’s balance. As an example, if you’re looking at where you are along your journey in planning for, say, retirement, balance may not be 50–50, it might be 90–10. The fulcrum may be further over because you need to put more emphasis on retirement, but that doesn’t mean you can’t have some emphasis on your philanthropic goals or your charitable giving.
We will often say to clients who are in that stage where they’re building their wealth, if charitable giving is important to you, if building a charitable intent for your family and having that culture as part of your family legacy is important to you, then you can absolutely have a plan where a portion of your wealth can be dedicated to that. And how much that is really up to the family and what their goals are. It is achievable, it’s just a matter of moving that pivot point to a place where you can get that balance from what you’re trying to save for your future and also what you’re trying to save in terms of being able to give back to your community, which as you mentioned for a lot of people, is incredibly important.
You used an important word, which is plan. I think that’s a critical piece that maybe sometimes people don’t think about. We see a lot of people being very charitable during their lifetime, whether that’s cutting cheques or responding to requests for donations, but maybe people don’t always consider planning their giving as either part of their retirement plan or as part of their estate. Can you just maybe give us a bit of an overview of the most common ways Canadians can create a philanthropic legacy, whether it’s during their lifetime or after they’ve passed?
Yeah, so I think most of the listeners would be familiar with just making a one-time gift where you’re writing a cheque and making a contribution. And let’s not forget that idea of, if I want to do something at a particular moment that benefits me, the opportunity to create something like a foundation, whether that be public or private—we can talk about that a little more if you’d like, Leanne—but really the major way that Canadians give today is by making that one-time gift. If something were to happen to you, either a temporarily impairment or a permanent impairment, or if you were to pass away that gift that you’ve been doing in that one time ends at that moment, typically. Now there are things that you can do to mitigate that, but typically that’s going to stop at that point. So, if you want to create that lasting legacy then you need to plan that out in advance.
For most Canadians, that means doing something like a foundation or having donation planning built in that estate plan as part of their Will. So, a creation of a foundation or a legacy specifically mentioned through that Will, and to your point earlier, a lot of people don’t think about the importance of the gifting that they’re doing. I think a lot of people would like that to continue on post an impairment or their passing, and they’re not sure exactly how to do that. So a big part of it is that plan and making sure that you’re discussing that with your advisors.
So, we know that just like people could make a one-time gift in their lifetime, they can make a one-time gift in their Will. But you mentioned a couple of times foundations, and you talked about private and public, and I think probably when most people hear the word foundation, they assume it’s something only ultra-high net worth people might have available to them or make enough of an impact of a gift for it to be worthwhile, but that’s not the case with public foundations. So maybe you could just explain a little bit more about public foundations and donor-advised funds and how they don’t have to be tens of millions of dollars.
Yeah, so a donor-advised fund is really the ability to take multiple individuals who want to contribute to charity, but maybe don’t want to see all of that go immediately to that charity and pooling their capital together to allow for efficiency of managing that overall foundation.
It’s become much more common today where an individual says, “I want to donate X amount to a charity, but maybe I’d like to do that over a period of time, say three years or five years or 20 years.” Or, “I want to put money in today and I want this to continue on either for a particular period of time, or potentially in perpetuity so that I can support this charity after I’ve either passed away or perhaps I’m thinking in terms of a cognitive impairment and I want to make sure that this continues on.” I can set that up in advance through a public foundation or a donor advised fund.
What that allows me to do is from a tax perspective, I can take advantage of that tax benefit immediately on that contribution, and then have the assets be delivered out to the charities just as I would if I were writing a cheque every year, they’re going to receive that amount on an annual basis. It’s good for me because I’m able to get the tax benefit when I need it. It’s good for my charities because it guarantees them that this money has been set aside and it’s going to be delivered out over a period of time. It’s also good for both the charities and I because that money is going to grow tax-free, and so I’m likely going to be able to contribute more over a longer period of time than if I just wrote a cheque and gave them that money in advance.
For a lot of Canadians now, this is becoming a great way to begin that philanthropic journey. They can also bring their kids in so they can start to have the children be involved. Those kids can have input on the charities that are being impacted or benefiting, and it allows the family to really, we’ve seen this, families coming together around this common idea of a legacy in a particular area. Parents get to know their kids better, kids get to know their parents’ ideas better, and it really helps to build that culture and create that lasting legacy.
Yeah, that’s a great point about the way that the family can work together on something like a donor-advised fund or a public foundation, or a private foundation, but those aren’t available to everyone, so thanks for that. And I think people, if they want to learn more about donor-advised funds, they can check out our wealthmanagement.com website, and there’s probably some more information for them there. You talked earlier about what happens if someone passes away and doesn’t leave a Will, and the fact that they may be surprised that their intentions can’t be met. And similarly, you talked about someone losing their capacity and not being able to make financial decisions for themselves. So, we know that they can’t fulfill on those intentions, but what do you suggest that people do in order to… beyond actually getting the Will and power of attorney in place to document their intentions, how do you suggest that they also kind of leave that legacy so that their family knows what they want?
When it comes to estate planning, communication is incredibly important. Making sure that the people in your family really understand what it is you want to have happen, because in the case of a cognitive impairment where I’m no longer making decisions for either a short period of time or potentially the foreseeable future, the power of attorney would need to understand what are the things that are important to me, and hopefully carry those things forward. So that level of communication, making sure people know what your intent is, what you’re passionate about, what are the things that are important to you, you can’t replace that with anything. Really having that ability for whether it’s your loved one or somebody close to you that you’re choosing to be your power of attorney, making sure that they’re aware of what’s important to you and how you would act is really important.
Yeah, it’s not something that might be naturally available, unless they’re going through and researching where you’ve given in the past. It may not be intuitive for someone who has to step into your shoes to know where you would like your money to go in the future. And I think it’s important for people to know as well that they should give their attorneys the authority to continue to do gift giving, right?
Yeah, and so I would say making sure that they understand that that’s an acceptable expense as part of their job as being a POA. Because if you’re managing somebody’s expenses, you’re managing their money and you’re making decisions on bill payments and those kinds of things, and possibly in partnership with somebody else who may be the power of attorney for personal care, or maybe you are both. If you are looking at that and going, “Okay, would Tony really want me to make this contribution to Yukon University this year?” I absolutely would want that. Communicating that in advance, building that into the power of attorney, having people understand that this is what’s important to me, is really important. I will say it’s also important in the opposite, if it’s something you don’t want to have happen. If you want to have every penny put towards maintaining my life in my home as an example. If that’s my priority, then communicating that, making sure that that’s documented, that everybody understand that those are the things that are important to you. That’s what’s going to lead to success.
Yeah, great points. Well, we started this conversation talking about the younger cohort, but clearly the points you’ve raised apply to anybody who’s at any stage of their life and their planning journey. If you hope listeners, Tony, can just remember one thing from the conversation we’ve had today, what would that be?
That’s a great question, Leanne. For me, that old saying, “If you fail to plan, you plan to fail,” really applies in particular around estate planning and charitable intent. If you’re not thinking about these things, then somebody else is going to write the final chapter of your story. You’re not the one putting that pen to paper. For the amount of time that it takes, for the minimal cost involved, for the transferring of your knowledge to your family, before you transfer your wealth, planning is absolutely the best investment you could ever make. So I would encourage people to take that time and get their intentions down and get that plan completed.
And communicated, like you said earlier. Right, such a critical part.
Yeah, absolutely.
Thanks, Tony. I know we could go deeper into a lot of these topics, but for today, thanks for joining me to talk about some of these considerations in determining how philanthropy fits into wealth planning and why this matters beyond wealth.
Thank you, Leanne. It’s been a real pleasure to join you today.
You can find out more about Tony Maiorino on LinkedIn and more on this topic from Tony and other experts on his team at rbcwealthmanagement.com. If you enjoyed this episode and you’d like to help support the podcast, please share it with others, post about it on social media, or leave a rating and review. Until next time, I’m Leanne Kaufman. Thank you for joining us.
Outro speaker:
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There are many ways to give to make a real and lasting impact, now and in the future.