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Setting up a donor-advised fund with the help of a local community foundation is a good way to leave a charitable legacy for future generations

Pathathai Chungyam

Setting up a donor-advised fund with the help of a local community foundation is a good way to leave a charitable legacy for future generations, says Rahul Bhardwaj, President and Chief Executive Officer of the Toronto Community Foundation.

A donor-advised fund is like a charitable foundation – an endowment producing an income stream for good works, for the long-term – with the administrative tasks handled for the donor by the institution that oversees the fund. Those tasks include the tax receipts, legal and audit duties, accounting, investment and governance. Non-profit agencies known as community foundations attempt to provide deep knowledge of local needs and the organizations that seek to meet those needs. Many financial institutions also provide donor-advised funds for their clients.

Canada has a network of 183 community foundations set up for this purpose, Mr. Bhardwaj says. "They are all fundamentally about connecting philanthropy with their community." He traces the history of community foundations to a 1917 meeting in Cleveland of retired bankers who were looking for a way to pool capital to generate income in perpetuity for local needs. Winnipeg got on board in the 1920s, Vancouver in the 1940s, and Toronto in 1981, he says.

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"What we're really doing is connecting a series of narratives, an individual or family will to leave behind something," Mr. Bhardwaj says.

The Toronto Community Foundation administers about 400 family and individual donor-advised funds. Across Canada, community foundations administer roughly $3-billion in collective assets.

"The very concept of legacy is really picking up steam. There are a lot of people who are seeing the inequities in their cities. They're seeing their governments being more challenged and they can see themselves as a part of the solution. The concept of people wanting to give back is very strong."

Each year the Toronto Community Foundation publishes a report on the city's "vital signs" that identifies successes and challenges, and "then we spend the rest of our time identifying charitable organizations in the city that are advancing Toronto's vital signs," Mr. Bhardwaj says. "We fund some of the solutions through our grant programs, but we also share all of that information with our fund holders. You may want to give to your church or university or an arts institution, or you may be interested in supporting the environment or youth or seniors or alleviating poverty, and we share our findings and our due diligence."

The community foundations have many ways of supporting youth, he says. "Some folks think the key to a decent future is through arts or music. We provide an opportunity to leverage the giving across different areas. It can be everything from high school teams, scholarships and sports leadership programs to early childhood reading programs."

An area of growing interest to philanthropists is social capital and community-building, he says.

"We're seeing a number of philanthropists step up in Toronto and talk about how to engage diversity in Toronto more positively, particularly with a focus on youth. We've got an increasingly diverse and divided city. There are those who are looking at this and saying this is a trend that does not bode well for the city and how can we get involved to ameliorate that divide?"

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Donors who wish to support causes in several communities can do so through the network that the Toronto Community Foundation is part of, Mr. Bhardwaj says. Someone who lives in Toronto may have been born in Vancouver and wish to support charities there. The Toronto Community Foundation will administer those charitable funds.

The minimum amount required to establish a donor-advised fund at the Toronto Community Foundation is $25,000 over two years. "You don't necessarily have to spend all of that money immediately. It provides you an opportunity to really think through your strategy," Mr. Bhardwaj says.

Donors receive a tax receipt for the full amount they contributed to establish the fund, and any subsequent amount.

For those who wish to leave a legacy, a community foundation is a "trusted partner," Mr. Bhardwaj says, and its knowledge of community needs and organizations allows donors to "extend their reach into areas they don't even know exist right now."

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