E21: Tax-Effective Giving with Ali Spinner

This podcast is brought to you by Gensler Wealth. The information discussed today is meant to be general in nature and not tailored to your specific investing, tax or wealth planning circumstances. This means that you should talk to your regular Ginsler wealth advisor or your own advisor before acting on any information we discuss today. Nothing in this podcast is intended to be a solicitation and past performance does not guarantee future returns for those who are easily excitable. I must forewarn you that today we are talking tax, so prepare accordingly. Today on the unlimited podcast we talk to the Tax Ninja herself, Ali Spinner, partner at Crow Soberman. We talk tax effective charitable giving and hear Ali's 3W approach when advising clients. Let's go. Well, hi everyone. Welcome to the Gensler Wealth Unlimited podcast. You know, we've had a lot of topics that we've covered in the past over the last year, real exciting things from different investment managers to cyber security to artificial intelligence. But today is the most exciting topic because today we're talking tax. And I know everyone's been waiting a year for the podcast on tax to come. So here's the first in that series. Really excited to have Alexandra or Ali Spinner with us today. A partner in Crow Silverman's tax Group, she's known as the Tax Ninja and she's going to explain to us why. She's a member of the firm's management committee and the leader of the High Net worth tax practice, and she focuses on helping wealthy families and high performance professionals structure their affairs in a tax efficient manner. As always, her full bio will be in the podcast, so I'm not going to go through the entire thing of note though, just in the last number of weeks. After 20 years of experience in public accounting and tax and estate planning, she was elected as a Fellow of the Chartered Professional Accountants of Ontario, which is a very, very big distinction and pretty amazing. So Allie, welcome to the pod. I guess I'm supposed to say, hey.

Brian, thanks so much for having me. It's a pleasure to be here.

Awesome. So, you know, tax is a ginormous subject. We're not covering the whole world of tax today. What we thought we would focus on and really get Allie's thoughts with her area of expertise on tax effective giving strategies or tax effective charitable giving. She'll give us the overview and the definition. Before we jump into that though, we always like our listeners to know who we're speaking with. So maybe Ali, can you just give us a little bit of background on yourself? Where did your absolute love and devotion for Tax come from. And, and you know, I love the Tax Ninja nickname, so I want to know a little bit about that as well.

Absolutely, absolutely. So the, the interesting thing is that I, I knew nothing about tax. It's kind of a happy accident that I ended up here. I actually went in, in my undergrad, figured I was going to go to medical school. My father was a physician. That's kind of what I knew. Not that I knew much about medicine, but my, my world was not very broad at the time. Did a 180 in undergrad and decided, hey, I'm going to go into accounting. And was lucky enough to find a graduate level degree that was an accounting, an accounting master's degree that would take me. And when, when I had a chance to start as a co op student, you had, you had a chance to start either in audit or tax. And I knew nothing about tax, but I knew it was hard. Everyone always talks about, oh, tax is so hard. I said okay, well if it's hard, I'm going to do that. Crazy. But that's just like, yeah, yeah. And the Tax Ninja moniker came along. I think, I think my passion for tax and helping people live a tax efficient life really shines through. And most of my conversations in life, it's sad but true if you ask my husband or children, but it does. And some along the way started calling me the Tax Ninja and it stuck. It's a joke of course, but I wear that, I wear that well and I wear it proud.

Awesome, fantastic. Well, it sounds like a lot of folks that sober Crow Silverman have nicknames. I know obviously the managing partner there, Adam. And we just call them the Tax Man. And I don't know where that originated either, but we'll give it, we'll give Adam a little shout out as well. Tax is an area where you always hear, you know, let's go, let's be very conservative on tax. Let's be aggressive on tax. Ultimately, we're working within whatever rules CRA has. You know, you have to work within those rules. When you're thinking about planning and we'll get into the charitable giving in a second. But when you think about this gives us some context when you're thinking about working with your clients from a tax perspective and trying to maximize their after tax dollars or minimize their tax, which the government highly actually encourages you to do. Everyone has the right and should try to minimize their taxes within the rules. How do you think about that and balance the different sort of risk levels of conservative and aggressive when you're consulting your client and advising.

I think that's a great question. I think that's a very, very good question and one, one that can be interpreted in a few different ways. For myself, for myself, the type of clients that I in particular attract are clients who want to sleep at night, who want to know that their I's are dotted and their T's are crossed. They don't want to find their name on the, splashed across the front of the newspaper when, when a plan that they did goes sideways, per se. And quite honestly, I'm upfront with, with my clients when, when they're interviewing me and really I'm interviewing them to see if there's a fit with respect to mindset and, and I explained that, that I'm an accountant. I'm not here to make your tax disappear. We're here to play within the, the, the rules of the income tax. As you mentioned. We're here within, to play within the box. There are certain areas where things are absolutely black and white. We know that meals and entertainment expenses are only 50% deductible. There's not a lot of thinking that goes on behind that. But there's many areas that are shades of gray and in some cases, in some cases the gray is much stronger than others. But we're playing in shades of gray. And I think it's always important to have a discussion with, with clients with respect to risk tolerance and understanding that there may be a filing position to present a result or a transaction in a certain way that may be more or less favorable. And the client needs to understand that the cra, when applying the law, may have a different interpretation than perhaps their return has been filed. It doesn't mean that the CRA is right per se. They may just have a different interpretation and want to assess in a different way. And what's the risk of doing so? Certainly we're not taking positions that are going to result in penalties for, you know, willful default or neglect, any of those items. And sometimes the downside could be the application of non deductible interest if there's an item that the CRA disagrees with and you don't want to take it to court to fight it. But again, I think, I think that we do play in shades of gray and it's important to understand what the rules are. But typically the clients that I attract are clients who want to make sure again that they're living their most tax efficient life, but they're not going to end up on the front page of the Paper, quite frankly.

And what's happening, I don't know if you get this view from your seat, but what's happening inside CRA these days? Based on your many decades of experience, Are you seeing more outreach for reviews and audits? Are you seeing less because they're understaffed, I guess, and overwhelmed as people are hearing? What's your vantage point view?

Sure. I think there's a couple of different things that I'm seeing, certainly along trend lines. So. So one is that certain people's tax returns are, you know, and it could be just a normal typical assessment, or it could be where they're asking a few more questions about an item. There are certain tax returns that are just getting caught up in the Canada Revenue Agency system for years, like literally four years. I myself have, have a, an adjustment going back for medical expenses on my own tax return. Been, I think, 16 months and I'm still going back and forth with them. And unfortunately, clients are beside themselves, as I am beside myself when they're looking at me asking why is it taking the CRA just so long to process something to send a refund? And I don't have a great answer. This is the situation now we're in. There are certain things that are just taking a very long amount of time. And I think there are also certain areas where we are seeing more targeted activity within the CRA with respect to what they're looking at. For example, we're starting to see more and more letters going out to clients where they have had a liquidity event and they have perhaps used a trust to multiply the use of the capital gains exemption amongst their families. And we're seeing, we're seeing questions from the CRA wanting to audit those transactions and make sure that one, you know, the shares of the company that was sold by the trust, that they qualify for this special tax treatment. We're seeing the government wanting to make sure that the money that was being allocated to the beneficiaries of the trust is actually belong to the beneficiaries, which it absolutely should. We're seeing a lot of activity in that case. It's likely because there are other players who are perhaps not as pure as others. And we're seeing increased audit activity. But one other area that we're seeing in the, in the kind of the overall tax world, on one hand I'm seeing, and this is not necessarily the cra, this is really in the broader, in the broader scope, I'm seeing on some level what I would call simplification of the Tax world. A lot of the, what I'll say, a lot of the cute things or small deductions that people used to be able to claim or cute planning options that were available, a lot of those are going by the wayside. And we're seeing an environment where as a tax accountant, my job is really changing from wearing a. I don't want to say this, and I have people think that I'm not a creative planner. I absolutely think that I am. But really in the industry, it's. The shift has moved away from putting on your most creative planning hat to helping your clients deal with the complexity of the rules. The rules are becoming extremely complicated. Bud's words. Whether it's safe income dividends, capital gains exemption, we're seeing calculations and computations that what I would call average small Canadian businesses, privately held companies, have to spend thousands and thousands of dollars on preparing each year for really not a tremendous amount of benefit or value, but just to comply. There's been also some, some changes in the world of foreign reporting over the last year where if you have investments or assets not in Canada, the amount of reporting and computation that has to go into those has become really quite wild in certain circumstances. So it's really an interesting time where just to even comply with the law, the costs to comply are becoming really, really high.

Yeah, well, and you've just illustrated a whole host of different areas that you have to focus on or your clients have to focus on. As I said, tax is such a broad category. But let's now actually hone in a little bit on the main event for today, which is tax effective charitable giving or tax effective giving, maybe you can give us, before we dive too deep, just the high level around the rules around charitable giving for probably individuals as a start, which is sort of how I think most people give to charity. Although you would know better than me, seeing that you do all the tax advice and tax returns. But how does charitable giving generally work for someone who wants to donate X dollars to a registered charity?

Sure. And I think that's a great question and a great place to start. So the way that I think about it and the way that I explain it to clients is for the typical, for the typical person who has, let's say, you know, more than a small amount of income. So for the typical high income earner, when you make a charitable donation, you can really think about it that it's costing you 50 cents on the dollar. So for every dollar you give away, you will get back. This is for a typical cash donation Plain vanilla. For, for every dollar of cash that you give away, you will get back a tax refund of about 50 cents on the dollar. So if you're giving away a buck, it's really costing you 50 cents out of pocket to give away that dollar. You're giving away $10,000. It's costing you $5,000 out of pocket to give away that $10,000 in the first place. And that's a result of the dividend tax credit that you refer to, whereby you effectively get back 50 cents the dollar for giving away a dollar of cash.

Okay, so that's, that's super high level. You said dividend tax credit. Is that what you call it, charitable tax credit?

Right, Kaj, you're absolutely right. For every dollar that you give, for every dollar that you give away, you get back about 50 cents in the charitable tax credit that reduces your taxes. Absolutely. One thing that I should mention as well is there are a couple of other limits. For example, people might say, you know what, I want to make all of my tax disappear. Tell me, how much money do I have to give away to make every dollar of tax go away? And there are limits. Typically, you can make donations up to 75% of your income, so you can't quite shelter all of your tax that you would otherwise pay. But typically you could shelter about 75% of the tax that you might otherwise pay. There are limits within, within the Income Tax act, for example, in the year of death, you can actually shelter all of your income by making donations. But that's specific. There's also certain, certain specific items that you could give away that allow for a more advantageous shelter. But those are situations where you're giving gifts of certified cultural property to appropriate institutions, which I think is beyond the scope.

That's a little bit out. Yeah, for us. Okay, so before we dive into sort of the framework that you use with clients when you're determining how best to make some of these charitable contributions. So let's just describe or, or, or define what tax effective means, because that's sort of in the, you know, the, the title or theme of today's episode. Does that mean lowest cost per dollar donated? Does it mean an ability to give a bigger donation with a smaller amount of money? Maybe those are actually the same thing just said different ways. Like, how do you think about tax. What does tax effective mean in your world?

I think, I think those are actually both great ways to put it, and I think that it actually could mean something different to two different people. On one hand, one person might think about it as they want to give the most amount of money away. And by doing so they want to, you know, they want to perhaps give away their tax savings because it'll make their, it'll allow them to give away more dollars to the charity. And for other people, they may decide that they want to give a certain gift, you know, in absolute dollars and they want that gift to, to cost them the after tax amount to be as low as possible. So I think for two different donors, you can have two different ideas about what does the most tax efficient gift mean to them. And it really comes down to the question of how much out of pocket cash is the person giving.

Okay, perfect. So that's, that's a good guardrails for what we're trying to achieve here. And then, so you have a pretty interesting, because we've chatted about this in the past with clients and otherwise you have a pretty interesting framework that you use with your clients when you're trying to figure out what's the best way to make these charitable contributions. I think you call it the 3W approach, if I'm not mistaken. Maybe you can tell us what, what those are. Usually I'm, Isn't it supposed to be the five W's? What.

Right, right.

When, why, and then how. But you use three W's because you're more efficient, you're tax efficient, obviously. So you, you, you've, you know, 50, 50% better, you know, efficiency in, in the, in the five or six W's, whatever they are. What, what are your W's? And, and maybe how do they work?

Sure, sure, I like that. And, and, and really, you know, I haven't patented the, or trademarked the, the saying yet, but it's really something to help guide my discussions with clients. And, and I think that I'll spend a bit of time here if that's okay with you. Brian.

Yeah, please go ahead.

And so the, the, the W's, if you will, are the, the what, where and when. The who the money is going to, which to some people would be the most important W is really, is really something that's up to the client, for the client to determine which organizations are near and dear to their hearts. But the, the what, where and when all have important tax items to think about. So when we talk about the what, the what means what is it that we're actually giving? Are we giving cash? Are we giving shares of appreciated stock? Are we giving shares of private companies? Are we giving a gift of life insurance? Are we using a Flow through share to make a gift. Are we giving, you know, are we giving crypto or NFTs? Are we giving? You know, there's a whole host of, of, there's no end, I should say, to the limit of, of the things that we have that we can give away. Most typically we think about gifts as gifts of cash. But what's very important to realize and probably if the most important thing that your listener can take away from this call is that the most efficient way to make a gift is to, and simplest, I should say is to give a gift of appreciated stock. If you have a non registered investment account and if you have a portfolio investment in public company stock, there's a beautiful way that you can make a very meaningful gift on a very tax efficient basis. And if you actually give a gift of that stock in kind from your investment account into the investment account of the, of the charity, a couple of really great things happen. So number one, you don't actually pay any tax on the appreciation within that stock. So if you have two choices, let's say you've got, you've got shares of Apple and those, those shares of Apple have been appreciated a lot. And you have a choice. You can either sell the shares of Apple and then gift the cash or you can actually just go ahead right away and give away the Apple stock. If you actually go ahead and give away the Apple stock in kind, you won't have to pay tax on the associated gain within the Apple stock in the year that you otherwise dispose or give away the stock. But you also get a full donation receipt for the full fair market value of the stock that you gave to the charity. So one, you don't have to pay any tax on the underlying gain within the stock that you gave away. And two, you can use the charitable receipt to cover off other sources of income. You can still get the donation receipt, whether it's employment income, dividend income gains from other securities that you sold, whatever it may be. And I think that's something that is very simple and is often forgotten. And as an accountant, when it comes to the, you know, end of the year and I'm doing my clients tax returns and I'm seeing their, they're writing round number checks to certain organizations. I always say, okay, let's pause. I can see that you're giving away round number checks. It means you're probably giving cash. Giving away that cash. Let's talk about, let's talk about making a gift of a security from your non registered account. Of course, if it's in your TFSA or your rsp not going to fly. But if you've got non registered investments, then absolutely it'll help. And people often think too that, oh, it must be a complicated system. It's not complicated at all. Probably most charitable organizations that we're making donations to on their website will, will have the stock transfer form. And it should be as simple as, you know, instructing whether it's, you know, calling up Brian or whoever it may be and say, hey, transfer, you know, transfer this stock to this organization. Here's their brokerage information. That's it. That's all you gotta do. What you'll get is you'll get a donation receipt that's a little bit special. It'll look a little bit different because the donation receipt that you get from the organization will actually state, you know, you gave us a hundred shares of Apple stock. Um, but it'll still have the donation receipt information on it. It'll show the fair market value of what it is that you gave. And then you have to be sure at the end of the year that if your realized gains and loss report from your brokerage account doesn't back out that gain, you have to make sure to otherwise back out that gain. Report it appropriately on your tax return. Because if you, if you forget, ooh.

That'S a good reminder because I did this last year, made a donation of appreciated stock and as I'm finishing up my taxes for this year, I don't know if I've backed that stock out. Now that you mention it.

Sounds good. Yeah, it's, it's important.

This podcast was worth it. That's it, it's over. We can end it.

Some institutions will, if they know that you have donated that stock, they will make sure to back out that gain or show it specially. But some may not know or some may not update it. So that's something important. Make sure you tell your accountant, if you're doing your taxes yourself, make sure you make the adjustment. You have to report the in kind donation of stock in a special way on your tax return. But about the plumbing, let's go back to the big picture here. Making a gift of appreciated securities is, is a way to really make sure you're making an extremely tax efficient gift because you know you may have invested in the stock for 1000 bucks, it's grown to 10,000, you'll never have to pay tax on that appreciation of $9,000. And you're still going to get a $10,000 donation receipt which you can use then to shelter, shelter other income. So that's a tremendously, tremendously tax efficient way to make a gift. The other thing that's worth noting also about giving a gift of appreciated stock, although we're talking, you know, we're talking a little bit about in the context of individuals, if it's a corporation that is making a gift of the appreciated stock, there's a triple benefit. In addition to having the corporation not pay the tax on the gain, the corporation gets the donation receipt, the corporation would also get a full credit to its capital dividend account, which is tax free money that the shareholder, or I should say a tax free balance that the shareholder can access by pulling out cash from their corporation. So back to our example before, if we said there was a $9,000 gain, that $9,000 gain that is now completely non taxable because we've given away the stock, there's now a $9,000 addition to the capital dividend account of the company. And that would allow the shareholder to extract $9,000 of cash if they happen to have cash sitting in the corporation without paying any additional tax. So it's kind of the triple benefit if you.

Yeah, I think that is the big takeaway from this. I hope. There's lots of stuff I think we're probably going to cover. But I agree with you this, this one takeaway of donating appreciated stock is pretty, pretty important. And I'm not sure everyone knows this or understands it.

And I agree with you. I think it's something very simple and elegant and quite easy to do. And it always amazes me that people aren't as aware of it as they should be. So I wanted to mention as well that in addition to cash and in addition to shares of public companies, it is very possible that an individual may have a private corporation and for one reason or another, they may decide that they want to donate shares of their private company to a foundation or to a charity. The rules regarding private company shares, it's a little bit more of an involved process, but it absolutely can happen. Typically what we see is that a situation where a person has perhaps done a freeze of their company and they have fixed value, fixed value stock with a stated redemption value. Oftentimes that that fixed value stock may get donated to a charity and subsequently redeemed pretty soon after the donation occurs. It doesn't have to be necessarily redeemed right after. But I can't really see that many charitable organizations want to, want to be owning private company shares of businesses for long periods of time. But that's certainly something that's on the table and should be discussed as well. People should consider if they have, if they have life insurance policies that they perhaps air quotes no longer need or, you know, maybe was insurance for a purpose, but that person, that purpose has now resolved itself, or that purpose is not a purpose anymore. Oftentimes people will donate life insurance policies that they have that are paid up, or they may make gifts of life insurance to endow a gift to an organization where they want to make sure that their gift lives on in legacy after they're gone by taking out a specific life insurance policy that is, that is for the purpose of charitable giving. So we see that quite a bit as well.

Right. And I think we should be careful not to get too deep down the rabbit hole on all these items, but just real quick on the insurance side. So if you, you know, take out a new policy with, you know, $5 million of a death benefit that you want your favorite charity to get when you pass away, how's that all treated from a tax perspective? You're paying premiums, you've got a death benefit. When do you get a tax, what do you call it? Donation, receipt and how much? And like, how does that all happen?

Sure. So I guess there's two different. Let's talk about the situation of a policy that is fully paid out. If somebody has a policy that's fully paid out when that policy is donated to the organization, generally what will occur? And I'm using the word generally because there's, there's going to be such specific rules around each policy in place here, but generally what would happen is that policy would be valued based on life expectancy, you know, the current health of the individual whose life is insured and all that jazz. When that policy is then donated based on that valuation, the receipt that the person receives would likely be tied to, you know, the fair market value of the policy at the time, because the charity, yes, it's true, they may, in your example, be receiving $5 million at a later point in time, but what's the value of that policy today? And then in the alternative, for example, myself, I have an endowed. I have an endowed gift to an organization. And in this case, I make policy payments. Every time that I make that policy payment, that policy payment counts as a donation receipt because I'm actually, I'm paying the policies on behalf of the organization. It's as if I'm making a donation and the charity is making then the policy premium. So in that case, policy premiums are the deductible or creditable amount, I should say.

Right. And so down the road, when they get, you know, again, let's just use. I'm picking a random number, $5 million from that policy that you're paying the premiums on. You. You do not get another receipt when. When that happens.

Correct. I am, I am making the decision that rather, rather I could, I may have said, well, on death I'm going to give X dollars and then on death receive the benefit of that large amount. I'm saying, no, no, I want to endow my gift by, by using a life insurance product, I'm going to pay for the premiums. Now, I'm only going to get a receipt for the premiums, but I'm also only out of pocket for the premiums. It wouldn't make sense that I get. It wouldn't make sense that I get a receipt for the large amount down the road. Right.

Okay, perfect. So that's the what and the what included cash and public company shares that are appreciated, private shares, life insurance, and maybe some other stuff. Now what's the next W. I'm on the edge of my seat here.

So the second W that I like to talk about is the where and what where means to me is where in the donor structure are they going to be making a gift from. For most people, they are going to be making a gift in their individual capacity. But for, for individuals or for families who have a more complex structure that involves corporations, trusts, all sorts of. All sorts of pieces of spaghetti. In the spaghetti picture that we sometimes looked at in an org chart, it's very important for the planners to take a step back and consider where is the individual or family, where is the donor going to get their biggest tax, biggest tax buck for their donation $. And although, although it might sound a little bit crass when I say that, keep in mind that some people want to make sure that they're saving as much money and then go on to actually even gift the savings amount that they've received from the planning. So although it might sound crass that there's always a good intent, but when I say the where, we have to recognize that depending on the individual or the family circumstances, we have to look at, well, what part of their structure is generating income and what type of income is it generating and where do we want to have shelter? And although it might be natural to automatically assume that, oh, we should be making all donations from our individual dollars or individual pockets, when you actually take a step back and start to think about, well, where Are the assets where. Where are the gains? Does it make sense perhaps, you know, in one year to make a donation from the holding company, in the next year to make it from the operating business, and then the last year to make it at the individual level? It really, really depends on where, on where the, the, the different tax attributes of each bucket lie and what the factors are at play. And for some of my, for some of my very wealthy clients and very wealthy families, we, we look at these different buckets, and sometimes the answer changes each year. We have to really, we have to really, we have to be flexible and recognize that the factors can change and that the location of where the dollars come from might change. At the end of the day, we're still fulfilling our philanthropic mission where the family is still being, Being charitable, being. Being donative, but it's just a question of where specifically do we want the charitable receipt to end up.

Yeah, gotcha. No, it makes sense. Perfect. Okay, so we got the what, the where, and then the final W. So.

The last W is the when. And one thing that cannot be overlooked when it comes to tax planning and philanthropic giving is the when. And the reason why the when is so important is that donation credits or donation deductions depends. If you're an individual or a corporation, they can really be carried forward, they can't be carried back. And the important point here is that with the when, we always want to match up the timing of the donation and the timing of the tax benefit with the timing of the tax hit. And what I mean by that is, if I have a client who I know is philanthropically inclined, if they're going to have a liquidity event, perhaps they're selling their operating business and they're going to have a large liquidity event. I have to make sure that as their advisor, we line up the timing of their large donated gifts with the same tax year as when their large liquidity event happens. Because if we don't do that, you may have, you may have an individual or a family or a client who has a liquidity event in year one and then only decides in perhaps year three or four that now is the time they want to be philanthropic. But unfortunately, we can't carry those tax benefits from the large gift that they want to make in year three or four back to year one. We can only carry them forward. So as an advisor, I'm always talking with my clients. I think my, my, my famous line is that I, I talk about it in probably almost every new meeting and every annual meeting with clients. I always say, look, it's very important for me, for me to know as your advisor, if you are philanthropically inclined, it's okay to say no. I'm not here to judge. I'm not here to judge. I'm not here to tell you exactly where to send your money. Although I'll have a few suggestions, I'm sure. But it's my, It's a very important for me to know if you are philanthropically inclined because we have to plan in advance. We have to know if it's your family's goal that you want to set up, you know, a legacy amount of money that's going to, that's going to be given away over time. We have to know so that when I know as your tax planner, oh, wow, we're going to have a transaction that's going to generate a lot of tax here. We have to make sure that we can then pull the trigger on the timing of the philanthropy at the same time so that we can make, we can make the philanthropy go as far as possible. So that's really why I speak to the when making sure that we match up the timing of the giving with the timing of when certain tax hits are going to happen.

Okay. Amazing. What, where, when. I still feel like some W's are missing, but you're the expert, not me. That's a lot of ground that we've covered. One of the key things I also wanted to touch on, you know, we hear about families that have their own private foundations and maybe why folks set that up. You know, you can give personally, as you say, you can give. Well, actually that may be one of your, one of your wares, I guess you can give personally. You can give from your core, you can give from your operating corp, your holding company, if it's an investment company or otherwise. I guess you could set up a private foundation. You probably need a whole bunch of assets and wealth to do that because it's very expensive and, you know, not super easy to do. Ali and I are both very familiar with a charitable sort of vehicle that's called the donor advised fund. And we should maybe talk about. So I don't know if that fits into the where as well, but can you just talk a little bit about making decisions between aside from just doing it with whatever structure you already have a private foundation that you set, the wealthy family would set up or a donor advised fund, and what's the difference? This might be a little bit of a long question and a long answer, I think, but let's talk about those two options.

Sure. It's a great question. It's an important question. There's a few things that you said there that I want to come back to. Setting up a private foundation, it's expensive. I don't know that it's cost prohibitive per se. I do think that donor advised funds, which we'll talk about more in a minute, can be more cost efficient. But let's talk about this whole concept of foundations funds and why are they so useful? The reason that they're so useful in general, one of the large reasons is that it really can help a donor hit that when w and the reason why that is that you may be having a liquidity, a liquidity event or a very big tax event that's going to hit in a certain year. You may have decided that you want to be a philanthropist or you are philanthropically inclined. You just may not know where your money is going to go yet, or you may want to dole out your money over time. And that's where private foundations and donor advised funds can be very beneficial. And the reason that they're very beneficial is these vehicles allow you to give away money today. So you can control the timing of when you get your donation receipt. Because you're putting money into the fund, you're putting money into the foundation. I'll use those two terms interchangeably for now and I'll discuss the differences in a second. But you're putting money into this, this foundation, you're getting your receipt today, you're getting the tax benefits of the money today. But you are actually able to dole out small amounts of money over time and really decide at a future point where the large bulk of the money is going to go. If you haven't already decided and in some cases as well, some people like to use these foundations or fund in more of an endowment type structure whereby they're going to put, let's say a million dollars into a private foundation or a million dollars into a donor advice fund. And perhaps they only want to give away the investment income that's then going to be earned from this investment portfolio. The important thing to realize though is with this concept is that when you are putting money into a fund or a foundation, you are giving away the money. You are giving up the entitlement to personally earn that future stream of investment revenue that is going to be generated from the funds. All of that future stream of investment revenue is going to belong to the foundation or fund. You're not going to get an additional tax receipt for it. You're only going to get your tax receipt or your donation receipt from the initial contribution that you make to the foundation or fund. But all of that future, future investment return is going to be earned tax free by the foundation or fund and can be spent or can be given away to other charitable organizations, which is great. So the reason that I like these so much, again as I mentioned, it ties into the when because it allows the person who's faced with a large tax event to manage the timing of when their tax receipt is going to come in by putting the money into the fund or the fending.

And to be clear, just, just on the tax receipt side, because you mentioned this a few times when you make that charitable donation, and you've already said this, but just to echo it, and let's say a year of liquidity, you set up a private foundation or you do a donor advised fund and you're setting aside, you know, large dollar amount for charitable donations, you get your full tax receipt in that same year. You don't have to use it all in the year that you got the receipt to offset income. If for whatever reason you want to, you know, you're going to have some bigger years of income down the road, you can use it down the road.

I guess you are absolutely correct. I would think that most people still just with the time value of money would probably want to get the tax refund versus in the future. But to your point, you end up donating too much and you don't have enough income to absorb the credit, then you're absolutely right. You can carry that credit forward for a short period of time, but you absolutely can and you can use it up in a future year. And I've had some clients do that too where they felt that they, they wanted to pay the least amount of tax possible and they would make a very, very large donation and then they would carry those unused donation credits forward for a number of years until they ran out. Then they would make another very large donation. Now remembering, in certain cases you can only, you can only make up to 75% of your tax go away. We can't make all of the tax, but that's exactly what they would do in order to manage their taxes. But back to the concept of foundation versus donor advised fund. I think that this is really worth discussing and exploring. I would say that probably in 95 out of 100 times that somebody comes along and says, okay, Ali, I'm ready to set up my own foundation, I say that's great, but instead of setting up A foundation. I'm going to strongly recommend that you use a donor advised fund. So a foundation, although it is a private foundation, you can set up your own family foundation. A foundation comes with it administration as well as responsibility, which is, which is okay. And some people are all for that. And they like the idea of having full control and management over the foundation. And that's. But in addition to the annual filing of, you know, return information, financial statements, as well as making the investment management decisions and all of that, what also comes with it is that even though it's a private foundation, private foundations in Canada are actually public. And what you may not realize is that you can Google the charities Directorate or the charity's listing on the Canada Revenue website and see what level of assets are inside private foundations and where the money is going to. And for some people that's totally okay and that's fine. And for other people, they think, well, wait a minute, I don't really want, you know, everyone being able to Google and see what's in my private foundation public, but it's a private foundation and a great alternative that, a great alternative that I see many clients using. Myself, I use one. I think you two also use one. Brian.

I do. We use this, we use the same one. And we should, maybe we can mention the name. I think it's not a commercial here, but we can definitely talk about it and I will.

But a donor advised fund is a, it's almost think of it as a, as a super foundation. It's almost like a super fund where different people put money into a fund that is managed by, or I should say into a charitable, a charitable foundation that is managed by the investment managers chosen by the, by the fund, the fund itself. And the money that goes in there is donor advised, meaning that you put the money in, you can then advise the foundation as to where you want those funds to go. And the beauty of that is that you again, you can put your money in today, you can get your tax receipt today. You can then decide where your money is going to go and which organizations you want to support in the future.

And each of them their own, their own funds. It's not like all of a sudden you're in a pool with everyone else and you have to donate some of what, what you did to something else. It's, it's almost like segregated funds in your own name or your family's name or whatever you want to call it. And then you direct the fund where you want them to send donations to.

Correct. Correct. And the beauty the beauty of this is that even though you are making a donation to a public foundation, the information within the public foundation is actually private. And this I think is, it speaks to a lot of people, is that you might use. So, so for example, I think most financial institutions have their own donor advised fund. There's many community funds, there's the Toronto foundation, for example. There's also the Jewish foundation of Greater Toronto, which is where my donor advised fund is. The beauty there is that the information that goes to the public is actually private. The information is as public as I want it to be or as private as I want it to be. That I think speaks volumes to many people when they're, when they're choosing whether or not they should go the foundation route or the donor advised fund route. It's also important to know that with donor advised funds, and this is true of really all of the donor advised funds options that are out there. It's, it's a bit of set it and forget it, meaning that you don't have to worry about, you know, preparing annual financial statements or information returns for the government, working with investment managers. That's all done for you by the fund. It's really a great way to allow people like myself who don't perhaps want their own foundation or perhaps don't have the dollars to donate yet to create a large foundation. It allows me to participate though on that type of level and advise on donations for money that I've put into the fund. And you're right, in this case, I receive a separate tracking each year. Allie, this is how much money your family has put in, this is how much it's grown. Where would you like the dollars to go to? And I advise on that.

Right. And folks may think, well, you have to put in jillions of dollars if you're going to do a donor advised fund or a private foundation. The reality is with, with the Jewish foundation, where both of us have our donor advised funds, you know, the minimum could be as low as what, $5,000? Depending on, depending on your age.

Yeah, depending on age can be low as 5,000, otherwise it's as low as $10,000. So there's many different alternatives. Absolutely. And I think, I think some other organizations have different threshold amounts at which they start. But, but to your point exactly, it's the barriers to entry, if you will, are quite low and quite reasonable. And it's a great way to be able to, to begin building your legacy, building your endowment and you know, whether it's me talking around the table with My kids. Okay, kids, you know, our, our fund this year has made X dollars. Where should it go? My kids like to send all of our money to animals. So that's great. Animals are taken care of. But you know, it, it provides a wonderful way to, to, to teach our children and work as a family and, and really shed a light on, on philanthropic giving.

Right. Amazing. Well, and, and I guess one final benefit, if you're particularly philanthropically inclined and making a lot of these smaller donations every year and you know, you have to keep track of your 57 receipts and you know, with the donor advised fund, you get one receipt when you make that donation and then they deal with everything else and you never have to deal with it again, you know, in some ways, which is, which is nice.

That's a great point. And as an accountant, bless your heart for bringing it up because what happens at the end of the year is I have very philanthropic clients, which is lovely. And I end up getting, you know, stacks and stacks or email after email of donation receipts. And you're right when you use a donor advised fund, and I'm sure each one of them is different in how they process the donations with respect to minimums of money they send out and all that good stuff. But the beauty is it's one receipt at the end of the year, you look for that one receipt of when you made that one gift to the donor advised fund and then all of the little instructions of, you know, send money here, send money there, it doesn't hit your tax return and your accountant will love you. Maybe I'm joking and winking. I know the podcast listeners can't hear this. Maybe even the cost of your tax return can go down.

Right, right, right. Well, my goal in life is to keep my accountants as happy as humanly possible. So that's, that's why I did it. And I did it because you're, because you're there too. Of course. So look, we are going to bring it to a close, I think, because I want to be mindful of your time. Any other final thoughts on just the charitable giving side that you think we should leave listeners with or do you think we covered it all?

I'd like to come back to the one point about making gifts of appreciated stock. If your listeners ever find that they're writing a check for, I don't know, let's say $1,000 a month and you're going to write a check to an organization, they should really pause and think, well, wait a minute, do I have a non registered account with appreciated stock in the account and consider giving, you know, the thousand dollars of appreciated stock or whatever amount it was that they're going to give and just pause there before they write that check because that money can go a long way and you'll get a lot more for your. For your tax efficient buck.

Right? Amazing. Okay, last question we ask everybody before we go here. So you know our theme around here. My listeners have probably heard me say this, you know, 20 times already by now. We. Our theme is your wealth unlimited. Unlimited. You know, we can help clients with whatever they need. We can look at any type of investment. We're sort of unlimited in what we can do for clients. The regulators probably don't want me to say that, so we'll say we're mostly unlimited. If, if you weren't sitting where you are with lots of nice flowers around you, I commented on that before we started. But if, if, if you weren't the tax ninja and you could do whatever you wanted in the world based on whatever you love in life, what would you be doing right now? Unlimited options. You can do anything.

It's a very loaded question to ask, ask a tax accountant that during the first week of April and all we can think of is doing anything but our jobs. Just kidding. That's a great question. If I could do anything, I would probably be on a beach with my husband and my two kids. Hopefully we could bring our dog along somewhere, go on a beautiful sailing afternoon, ride out in the ocean, enjoy each other's company and maybe catch something delicious to eat and cook it up for dinner on the beach.

Love it. Sounds amazing. Well, look, Ali, thank you so much. Really appreciate your time. Ali is very, very good. I hope listeners agree at making complex tax stuff sound nice and clear and simple. I hope it's clear and simple to me when I speak with you and I appreciate that. So wish you the best and thanks so much for your time.

With pleasure, Brian. Always a pleasure. Have a great day.

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