Creating a Legacy in Your Will: A Financial Perspective
Amanda Knapp, B. Admin (Econ), CIM, FCSI, CIWM
Portfolio Manager, Financial Planner, Senior Wealth Advisor at RBC
T: 519-747-7769
F: 519-747-1808
amanda.knapp@rbc.com
As part of our Will Power series, we chatted with Amanda Knapp, Portfolio Manager, Financial Planner, Senior Wealth Advisor at RBC, and a philanthropic member of the Waterloo Region community.
We asked her for her perspective on including philanthropy in a financial plan, as well the benefits of partnering with an organization like Waterloo Region Community Foundation (WRCF).
Q&A
When having conversations with your clients, how do you know if/when to bring up the topic of philanthropy as part of their financial planning and/or estate planning?
It’s just a natural part of the conversation because when you create a financial plan, you’re setting out a client’s total wealth picture. It’s just one of the buckets that you check off – what is the legacy that you want to leave behind?
What are the different options available for those who want to leave a legacy?
Many times, families like to engage their children in their financial affairs. In that case, you can set up a gift for the family that children can continue to manage in perpetuity.
For families with substantial wealth, they will set up a fund that they can donate to now, but they will also leave a legacy in their Will. They will put aside money in a foundation, like WRCF, and as a family they plan together on how they’re going to give back.
It’s all done with the bucket of legacy planning, and what is important to you as an individual, couple – and your family.
What do you see as some of the reasons that clients will delay giving now and instead give as part of their estate plans?
Many of my clients enjoy giving while still here, as they get to see the gift being put to use. But there are benefits to gifting now, and leaving a legacy in a Will.
There are tax advantages to giving — both when you’re alive and when you pass — and I like to show them the impact in both scenarios: here’s what the estate gets when you make a donation at death, and here’s what you get if you donate while still alive. Both have benefits.
What’s something that people may not know about charitable giving and financial planning, both current and future?
Most people I speak to consider charitable giving as part of their financial plan. But the one area that people sometimes miss is the gifting of securities.
Depending on the situation, it can be more advantageous – to the person and the charity — if they donate securities in an appreciated position, rather than cash.
For example, when you gift property, you may realize taxable capital gains if the property has increased in value since you purchased it. By donating appreciated securities in-kind, you avoid triggering a capital gains tax.
Examples of securities that qualify for the elimination of capital gains include shares, mutual funds, and bonds. In addition, the donation must also be made to an approved donee (essentially, a donor that can provide a charitable receipt). The Canada Revenue Agency maintains a list of qualified donees on its website. It's also a good idea to contact the charity to make sure they can accept in-kind donations.
In addition to the elimination of a capital gain, donating securities in-kind also produces a donation tax credit. Together, these make it much more cost effective to donate securities instead of cash. But you should always contact your financial advisor to go over the details of your specific situation.
When would an organization like WRCF make sense to suggest to a client to partner with?
Managing your own charitable foundation – especially for others after you pass – can become very complicated. There is a lot of administrative work that will need to continue when you’re no longer here.
The benefit of partnering with WRCF is that they can better manage how those funds will continue while alive, and after you pass. From an administrative standpoint, WRCF makes sense because you have so many choices on how to direct the gift, and how to manage it based on what is best for the community.
What would you say to your colleagues who are newer in the profession when it comes to supporting their clients’ philanthropy?
Understand all of the options available when it comes to managing a legacy gift. In terms of options, you can:
Set up your own private foundation
Set up a foundation through an organization such as RBC, which manages the administration of the funds, but you’ll still need to consider who can manage it after you’re gone
Partner with WRCF, which will manage the gifting and administration, and after you pass away, it continues in perpetuity
There are pros and cons to all options, and advisors should understand the unique differences when meeting with clients to be able to assist them in making choices.
How to set up a bequest
The process for setting up a bequest is very straightforward. WRCF works with you to set up the fund agreement, which references that the fund will become active via a gift from the Will. Then, in your Will, you list WRCF as receiving a bequest. Fundholders can choose from a variety of types of funds. When WRCF receives the money via the estate, the fund becomes operational.
It’s important to note that future Fundholders can update their fund agreements with WRCF as many times as they’d like in their lifetime (at no cost). Regardless of any changes to the fund agreement, there is no need to subsequently update their Wills, as the Will just indicates that the bequest will be sent to WRCF; it is the fund agreement with WRCF that dictates what happens when the donation from the estate is received.
For more information about setting up a bequest and to ensure that you have the proper wording for your Will, contact Dan Robert at dan@wrcf.ca or 519-725-1806 x 205.
Note: This article was written prior to Cambridge & North Dumfries Community Foundation and Kitchener Waterloo Community Foundation unifying to become Waterloo Region Community Foundation. Although the article was created by KWCF, we have updated the organization name to WRCF throughout the text.