The Giving Tree
This article was originally published at thegaap.net, a provider of up to date accounting information, trends and changes, serving Accountants and Business people interested in Accounting for their businesses, March 2023.
On the whole, Canadians are generous, giving over $14 billion each year to registered charities. But, with over 86,000 different charitable organizations to choose from, determining who to support can be difficult.
Until life throws a curve ball.
On February 6, 2023, a powerful earthquake and a series of aftershocks struck the southeastern part of Turkey and the northwestern portion of Syria, causing significant damage and loss of life. According to media reports, almost 50,000 people have been killed and hundreds of thousands have been left homeless as infrastructure across the region collapsed.
As is the case in so many disasters, there has been an outpouring of support as concerned citizens scramble to help. In the wake of the earthquake, many registered charities and nonprofits have launched appeals for funding and donations. Crowdfunding campaigns have also sprung up to raise funds.
As financial professionals, it is our obligation to assist clients who wish to support causes —the earthquake in Turkey and Syria, the conflict in Ukraine, Hurricane Fiona— with the insight and information to do so safely and effectively. We’re constantly exploring ways to help clients maximize the difference that their donations can make.
Unfortunately, the urgency of the need may compel generous Canadians to lead with their hearts and wallets instead of their head. As trusted financial professionals, we have an obligation to step into this gap and help conduct the research necessary so clients can make informed giving decisions. Indeed, as reported in Forbes, “in the aftermath of Hurricane Katrina, the American Red Cross asked the FBI to investigate at least 15 fake websites that were designed to look like legitimate Red Cross appeals for donations.”
In times like this, we like to remind generous Canadians that:
No matter how much pressure you might feel from friends, family or your community, you are under no obligation to make a donation. A simple “no thank you” or “not at the moment” should be sufficient. If an organization uses high-pressure tactics, it may not be an ideal fit for your charitable dollars.
You are entitled to ask questions. How long has this organization been around? Is it reputable? Prospective donors can check the status of any registered Canadian charity on the Canada Revenue Agency website. Additionally, our team can help research organizations before you make a giving decision.
Not all organizations will direct 100 per cent of the donation to the specific cause, but may place the donation into their general operating budget to support other causes down the road. There is nothing wrong with this approach, but if you want to help a specific cause you need to ask questions.
Ensure your personal information is secure. You should never give social insurance numbers, credit card details or banking information to unknown entities.
Where possible, instead of cash, work with your portfolio manager to donate gifts of appreciated securities. Virtually all reputable charities will be able to accommodate these gifts, and while the process is slightly more time-consuming, it is most certainly more tax-efficient and potentially allows for larger amounts to be donated.
When disaster strikes, there is always an immediate need for funds. However, the need for funds does not go away once the crisis ends. Recovery and rebuilding can take years and will also need financial support. So, while the appeals might be urgent, you can take time to evaluate your options knowing that you can still make a major difference.
There are domestic agencies raising funds to support the victims of the earthquake. Donating to a Canadian charity entitles donors to claim the Charitable Donations Tax Credit (up to 33 per cent) on your 2023 income tax return. For many, the decision to give is not tax-based, but factoring in the tax credit may allow for larger donations. Donating to an international organization over the internet does not confer the same benefit.
Further, tax-efficient gifts of appreciated securities can be processed quickly and efficiently when working in conjunction with portfolio managers and investment advisors. You may also be more generous if you are able to give from a taxable account where the assets are not required immediately to fund daily living.
It is often easier to respond to emergency appeals if you have a long-term giving strategy. Portfolio managers and investment professionals are central to creating this strategy. Depending on your unique circumstances, a long-term strategy could involve cash gifts, gifts of securities, legacy gifts by way of insurance, establishing a donor advised fund, or even a properly constituted family foundation. Many families are electing to work with a dedicated philanthropic advisor—someone who can help clients explore their interests and identify charities that will have a positive impact on the causes they care about.
Giving cash “in the moment” may seem like the right thing to do, but a moment of reflection may end up bringing more value to both you and the charity. We’re here to help.
Craig Swistun is a Portfolio Manager with Lexicon Financial Group (www.lexiconfinancialgroup.com) at Raymond James Investment Counsel. The opinions expressed are those of Craig Swistun and not necessarily those of Raymond James Investment Counsel which is a subsidiary of Raymond James Ltd. Statistics and factual data and other information presented are from sources believed to be reliable but their accuracy cannot be guaranteed. It is furnished on the basis and understanding that Raymond James is to be under no liability whatsoever in respect thereof. It is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. Raymond James advisors are not tax advisors and we recommend that clients seek independent advice from a professional advisor on tax-related matters.