Charitable Giving Made Easier
Q3 | September 2022
Topic: Foundations & Endowments
September 23, 2022
Image used with permission: iStock/Sasiistock
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Charitable Giving Made Easier
Q3 | September 2022
Giving to charities and supporting our community are important to us at Nexus. We donate a portion of our management fees back to the charities and foundations whose portfolios we manage. We also directly support causes important to the Firm and its employees. Under the umbrella of our wealth planning services, we have, for decades, acted as the facilitator for clients to achieve their charitable goals.
We think that it is time to make charitable giving even easier for our clients and for Nexus to provide a complete range of donation solutions – whether clients choose to make occasional donations of securities or Nexus Pooled Fund units to their chosen charity, or to create their own ongoing Donor Advised Fund (“DAF”). We work with our clients so that they can easily set up their own DAF. We are knowledgeable about and have worked with several key DAF administrators – the organizations that are instrumental in making a DAF work. The investment management of the DAF can be performed by Nexus or a manager selected by the administrator.
Donating Nexus Pooled Fund Units
We are often asked by clients if they can donate Nexus Pooled Fund units directly to a charity. We now have a flexible mechanism to do this through an arrangement we have established with Gift Funds Canada (“GFC”). The client donates units to GFC, and requests GFC to send the proceeds to the client’s charity or charities of choice. For Pooled Fund units that have appreciated in value, this is compelling, as you avoid any capital gains tax on the units and get a tax receipt for the full market value of the donation. The process is simple: you choose your preferred charities and sign a donation form (which we will help prepare). Nexus can then manage everything else. You will receive a donation receipt from GFC based on the value of the Pooled Fund units donated. There is a minimum donation amount of $10,000 (which you can allocate to several charities) and a modest processing fee to GFC.
Your Own Nexus Donor Advised Fund
A Donor Advised Fund is a complete philanthropic solution that allows you to make and manage charitable donations as an individual or a family over a multi-year time frame. DAFs are at the intersection between wealth planning and philanthropy, as clients make proactive decisions about what to do with their wealth over time. Whilst offering greater flexibility and benefits than one-time donations, a DAF is also dramatically simpler and cheaper than a private foundation. You can find more details about how the mechanics of a DAF work by reading Alana Buckley’s blog.
Nexus client DAFs are administered by Gift Funds Canada or Canada Gives (the “Administrator”). Donations to your DAF can be made by anyone. They can be cash or in-kind, such as securities or Nexus Pooled Fund units. As with a one-time donation, a DAF offers compelling up-front tax benefits, but with the added benefit that the DAF investment portfolio will grow more quickly in the future than if the investments were in your own hands (as the investment growth in the DAF is tax-free). We require a minimum investment donation of $100,000 to open a Nexus DAF. When it comes to managing your DAF, there are some things that Nexus will do, some things that the Administrator will do and some things you do.
Nexus is your contact and investment manager:
- We help you set up your DAF
- We help you make donations to your DAF and grants from your DAF each year, if any
- We help you determine an appropriate asset allocation and we manage the entire investment process for your DAF in the Nexus Pooled Funds
- We provide you with copies of the investment performance reporting on your DAF that the Administrator receives from Nexus
- We continue to work with you to ensure the DAF is utilized effectively to meet your philanthropic goals.
The Administrator provides all necessary reporting:
- Manage all the behind-the-scenes regulatory and administrative aspects
- Send you a quarterly DAF statement
- Send you donation receipts for tax reporting
- Provide you with an annual summary of donations, grants, and DAF portfolio performance (if you use the Nexus web portal, your DAF statements will be available there as well).
You participate in the set up and management of your DAF too:
- You choose the name of your DAF
- You decide which charities receive grants from your DAF
- You determine the expected time horizon of your DAF and make any changes in donor advisors, administrator, investment manager, or in the asset allocation guideline. You can keep the DAF operating or close it at any time.
There are no up-front set up costs for a DAF. The Administrator charges an ongoing administrative fee based on the size of your DAF, in order to recover their costs. The fee is modest and still allows the investments to grow at a faster rate than they likely would if you had kept them in your own hands. The Nexus investment management fee charged to the DAF is calculated as if the DAF were still part of your overall portfolio at Nexus. As such, you and the DAF both maximize the benefit from our fee taper.
If you are interested in donating securities or Nexus Pooled Fund units before the end of the year, or if a DAF may have a role in your personal wealth plan, please connect with your Nexus contact to discuss further.