‘Accidental philanthropists’ need help from advisors

Over the past two years, Nazareth has seen a growing number of clients known as “accidental philanthropists.” Says Nazareth: “They’re not the typical people who are giving $10 million with a name on the building of a hospital or university.” Instead, these individuals tend to be older married couples that own their homes and have significant gains in their investment portfolios. These individual need advice on how they can give those securities to charities efficiently.

“Accidental philanthropists” also include individuals who receive a lateral inheritance from a sibling, aunt or uncle, says Nazareth. “That’s the real opportunity to say, have you thought about how this will affect your particular tax situation or planning situation?” he says. “In a lot of cases, [these clients] just think about writing the cheque.”

Business owners are another client group that need help with their charitable giving. Typically, these clients will want to have more control over their capital, says Nazareth, and are turning more often to donor-advised funds as opposed to private foundations.

Furthermore, donor-advised funds are appealing to business owners who want to stay away from the limelight. Anyone can look up information regarding a private foundation, says Nazareth, but the people in donor-advised funds can keep their charitable giving private.

“In creating a private foundation there’s a lot of asking that comes with it,” says Nazareth. “Privacy is something that’s growing in the minds of business owners and affluent owners.”

It’s also important not to get caught up in the numbers when broaching the topic of giving with business owners and “accidental philanthropists.” Often advisors get caught up in just the number a client needs to donate to eliminate capital gains, says Nazareth, but that may be more money then that person has ever given or considered giving to charity. “If they’ve never made a donation over $10,000 in their life,” he says, “it doesn’t matter how the numbers crunch, they are never going to give a quarter of a million dollars to charity.”

As such, it’s important to focus the conversation around why clients want to give in the first place and what exactly it is they would like to see happen with their donation.

Furthermore, many clients need to realize that some charities are riskier than others. Many popular charities relating to animals or the environment are very volatile, said Nazareth, in terms of their registration with the Canada Revenue Agency and their financial management.

In these cases, vehicles such as donor-advised funds, said Nazareth, can help clients give to small organizations over a period of time instead of donating a large lump sum. That way the client will have some flexibility with their giving should anything go wrong with the charity.