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Perhaps you've heard the story of the wealthy entrepreneur who was lost at sea. He was aboard his yacht with two crew members when a storm rose up and swamped the boat. The three men ended up overboard fighting for their lives but managed to stay afloat in an inflatable life raft.
"We're not going to survive. They'll never find us," one of the crew members said after a few days on the water. The wealthy man was calm. "Don't be afraid," he said. "Three years ago, I gave $500,000 to the local hospital. I donated another $700,000 two years ago. Last year, I funded their new $3-million cardiac wing," he continued.
"So what?" the crewman asked.
"Well, it's time for their annual fundraising drive and they're expecting another big donation. You can bet they're going to find me within a week," he said.
Now that the holiday season is here, many Canadians are giving thought to giving back. It might be for tax reasons, or for more noble reasons such as making a positive difference in the lives of others. How would you like your giving to be more meaningful this year? Here are six steps to more meaningful giving.
1. Understand your values
Your charitable giving should be aligned with what's most important to you. Here's an exercise I like to recommend: Draw a circle in the middle of a blank page and write the word "Me" in the middle. Then draw eight spokes extending from that circle. At the end of each spoke, draw another circle. Inside those eight circles, in no particular order, jot down up to eight things that are important to you. Next to each circle, jot down why each of those things is important to you. Now try ranking those values you've noted. Your giving will be more meaningful if you give to causes consistent with these values.
2. Understand your reasons for giving
Once you understand the reasons you give, it becomes easier to answer questions such as: Who should I give to (specific causes)? When should I give (today, or at the time of my death)? Where should I give from (my corporation, personally, through my family trust or foundation)? What should I give (cash, securities, or other assets)? How should I give (with or without recognition, by making pledges to charities for the next few years, by volunteering time along with my money)?
3. Know the charities
Start by ensuring that the charity is registered and in good standing with the taxman (go to cra.gc.ca and click on "charities and giving" at the top). Make sure you also understand the mission or purpose of the charity and that it's consistent with your values. Ask the charity for evidence that it's achieving its goals. Start by looking at the charity's website, then speak to the charity directly about its accomplishments.
4. Focus your giving
To make your giving meaningful, you'll want to have a greater impact on the causes you support. This will mean focusing your giving on a few select charities. If you give to too many causes, you'll be spreading yourself thin and may not have the same impact on any one charity or cause. Yes, diversification is smart – just as with any investments you'd make. But don't overdiversify. And be sure to look for matching opportunities where someone else has agreed to match your gifts to have an even greater impact.
5. Get the kids involved
There are fewer things more important to parents than passing along the values they hold closely. If giving is important to you, why not foster a common set of values in the family by involving the kids, too? This could involve setting up a family foundation if you have the means, but could be as simple as setting aside a portion of the money used to buy gifts for each other and contributing to a cause that reflects your family's values. Generosity is learned, so teach it this year.
6. Maximize your tax relief
Why not maximize the return on your giving? Consider these ideas: Claim all donations on one spouse's tax return; donate securities instead of cash to eliminate the tax on your capital gains; give during your lifetime to minimize probate and executor fees; donate life insurance to make a huge impact on the charities you support; and consider giving through your corporation (see my column last week).
Tim Cestnick is managing director of Advanced Wealth Planning, Scotiabank Global Wealth Management, and founder of WaterStreet Family Offices.
Tim Cestnick