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(Andrew Bannecker)
(Andrew Bannecker)

TAX MATTERS

Seven steps that will add more meaning to your charitable giving Add to ...

Tim Cestnick is president of WaterStreet Family Offices, and author of several tax and personal finance books. tcestnick@waterstreet.ca

Getting our youngest son to take a bath when he was younger was no easy task. I recall a few years ago, after what had been several weeks (or so it seemed) since his last scrub-down, I finally had to level with him.

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“Michael, I don’t want to hear any more complaining,” I said. “But Dad, I’m not dirty,” he would argue. “Son, you’re going to have a bath, twice every year, whether you need it or not,” I insisted. Reluctantly, he would give in. Today, I’m glad to report, we’ve moved him from a twice-per-year episode to a regular cleaning where we can’t get him out of the tub.

I realize that philanthropy can be like that. We do it, but reluctantly at first. Yet, it becomes easier, and even enjoyable, over time. This month, thousands of Canadians will make a difference in the world by making charitable donations. So, I’d like to share some lessons about effective philanthropy that I’ve learned over years of working with affluent families. These are guidelines that can make anyone’s giving even more meaningful.

1. Think about what’s important to you.
Try an exercise. Get a blank piece of paper and draw a circle in the middle, and write the word “Me” in that circle. Then draw eight spokes extending from that circle, and at the end of each spoke draw another circle. Inside those eight circles, in no particular order, jot down up to eight things in your life that are important to you. Then, next to each of those circles, write down why each thing is important to you. Now try ranking those things in order of importance. Your philanthropy will be more meaningful if you start with causes that are aligned with these things on your list.

2. Take an investment approach to giving.
Think of your giving as an investment that creates social rather than financial returns. Understand each charity (see below), take a long-term view of giving to each one, diversify your giving (but don’t overdiversify – more on this in a minute), make your donation, then evaluate the impact. For larger gifts, get advice from experts.

3. Get the kids involved.
There are few things more effective to foster a common set of values than donating together. Don’t underestimate the positive impact on your kids when you involve them in your giving. Generosity is learned by example. You might set aside a portion of the money used to buy gifts for each other and contribute to a cause that reflects your family’s values. Put your favourite charities on your gift list, and ask others for theirs.

4. Understand the charity.
There are some basics here, such as ensuring the charity is registered with the Canada Revenue Agency (CRA) and has been filing its annual information return with the taxman (go to cra.gc.ca and click on “charities and giving” at the top). You should also understand the mission or purpose of the charity. What is the charity trying to achieve? Do their activities actually achieve these goals? (Ask for evidence of this.) Start by looking at the charity’s website, then speak to the charity directly about its accomplishments.

5. Focus your giving.
I talked earlier about diversifying your giving. Like any investment, it makes good sense to diversify by giving to more than one charity. But don’t spread your charitable dollars too thin. You’ll have a greater impact by giving more dollars to fewer charities than fewer dollars to more charities. Also, increase your impact by looking for opportunities where another donor has agreed to match gifts made to a charity.

6. Give of your time.
Volunteering your time and talents has multiple benefits: First, you can get to know a charity very well this way (there’s no better research). Second, charities can’t survive without volunteer help, so you’ll be doing your part to help fulfill the mission of the charity. Third, if you haven’t got the financial means to give, you can still contribute with your time and talent. If you’re looking for a local charity to help, speak to your local community foundation, or check out getinvolved.ca.

7. Be cautious with door-to-door giving.
Some organizations will pay people to solicit donations door to door or over the phone. Some of these are legitimate, but it’s not always easy to be sure. Some of these organizations use names that sound very much like legitimate charities, but can be fraudulent. The safest advice is to give directly to your charities of choice, or only give where you know the fundraiser or the charity.

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