On Charity

‘Tis the Season

Many people have a budget for charity and they begin to top up their donations towards the end of the year. That is good and they are to be congratulated for their efforts to assist their fellow beings.

People give to charity because

  1. They believe there are organizations who fill a void in our social structure. Could be disaster relief, or a spiritual structure. Perhaps comfort like shelters for the homeless or counselling for people who have issues. These people donate money because money is easier for them to give than it is to try to do the work themselves. It could be a time shortage and it could be a skill deficit.
  2. Some do it without much thought so long as they get a receipt to reduce their taxes. While still valuable to the charities, a more thoughtful approach might be better.
  3. Out of habit.

What works a little better.

Donors with means are usually the target for fundraisers. Ask anyone who has sold a business, or won a lottery, or inherited money. It is remarkable how adept fundraisers are when it comes to finding homeless dollars. Donors should find problems they can understand and assess. It is more fulfilling to address charitable gifts that achieve a goal they believe in.

The ideal donor is motivated. They see a problem well enough to know a given charity is helping to solve it, or at least minimize it. They are concerned about the problem for reasons specific to themselves. Donors could have many problems they are concerned about and are willing to support. Others would do well to find a few they can help a little more and who are ones that they identify with strongly.

The fundraisers should build a sound case for the donation they wish to have. Emotional images get a little money. Historic results, future plans, and the people who deliver the service on the ground are more motivating than the pictures of starving children. Fundraiser should clean up their message. They can establish efficiency by establishing their service to overhead ratio. If overhead is too high, donors are doubtful of the value of their donation. Not to the charity, but to the persons who need the service. If the ratio is too low, the suspect that organizational overhead is allocated to service instead of management costs.

Donors love an opportunity to invest in a more efficient way. There are many techniques that are aimed at allocating tax dollars to charity. These are often most usable in an estate. To get the most benefit, people must begin planning earlier.

Planned Giving

Planned giving is a process.

The gift supports the future and present needs of the charity. One way to think about it is the idea of donor replacement. If I give my church $50 per week, they may be hard done by if I pass on. It is not at all easy to get a new donor who predictably supports them. A capital gift earns investment income, and the income replaces the deceased donor. Life insurance is often the tool of choice for this purpose.

Properly structured, $65,000 invested at 4% earns the $50.00 per week lost at death. $100,000 would likely replace it including inflation. For a couple aged 65, both non-smokers and in standard health, the premium to provide $100,000 to the charity would be less than $200 per month. The potential tax saving can be enjoyed in one of two ways. Have the estate donate $100,000 a the time of the second death, or make the charity the owner in the beginning and claim credit for the premiums as donations. It will depend on the fabric of your estate to make the optimal decision.

No matter how you do it, the charity gets far more than the estate loses.

Many charities are afraid of planned giving because they fear people will reduce their current because they have a premium pay to support their estate donation. The fear is not well founded. Experience shows that planned giving tends to increase motivation and connection to a given charity.


Both the donor and the charity should organize their affairs to most efficiently meet their mandate. Tax efficiencies matter and should not be taken lightly. Many people would donate if the could see the purpose and ability of the charity and had an efficient way to make the donation.

It is like being a detective. Things come together when there is means, motive, and opportunity.

I help business owners, professionals, and others understand and manage risk and other financial issues. To help them achieve their goals, I use tax efficiencies and design advantages to acquire more efficient income and larger, more liquid estates.

In previous careers, I have been a partner in a large, international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.

Please be in touch if I can help you. don@moneyfyi.com 705-927-4770

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