The benefits of philanthropy for high-net-worth investors

Giving back: the benefits of philanthropy for high-net-worth investors

There’s no shortage of worthy causes in search of financial aid, especially in times of crisis, and for high-net-worth individuals looking to pursue their altruistic passions and give back, choosing which to support and how best to do so can be a difficult task.

Creating meaningful change could be more than writing a cheque and hoping your donation may help the right people. For many high-net-worth Canadians, it can also mean finding a better way to use their wealth to transform lives and make the world a better place.

At Manulife Private Wealth, we believe that smart philanthropy, built on enduring partnerships, is the most effective way to deliver hope to those who need it most. In this article, we take a look at some of the benefits of charitable giving and the most effective ways of going about it.

Benefits of charitable giving

Helping others brings its own rewards: A study by the University of Oregon found that charitable giving can create a surge of dopamine and endorphins that promote feelings of happiness and fulfilment.1 Charitable giving can also help build a philanthropic family legacy and, if set up correctly, can do so in a tax-efficient manner. The federal personal charitable donations tax credit rate is currently 15% on the first $200 and 29% on the remaining $200, and depending on which province you call home, there could be an additional amount raising the overall tax credit toward 50% of the donation.

Ways of giving

Navigating the options of charitable giving can be complex, with objective advice often difficult to come by. A 2014 research study suggests that while some 91% of Canadian high-net-worth households donate to charity, just 13% consult with their financial professional on the subject.2 However, having a financial professional during your philanthropic conversations can better help you and your family support the causes most important to you in a more effective and impactful manner.

While making a direct, one-off donation may benefit the recipient charity, the benefactor has no say in how that donation is used. For individuals looking to make longer-term contributions with greater control over how those funds are distributed and used, there are several other options available that could prove more suitable. We’ll look at them here in closer detail.

1   Estate planning

Making a charitable gift in a will allows you to support your chosen causes long after you’re gone. Planning in advance allows you to bequeath a set sum, a percentage, a specific asset, or the residual amount of your estate. Donating to charity in your will also reduces the tax owed by your estate. The exact value of the nonrefundable tax credits for your charitable donation is calculated based on your income in the year the donation is claimed. Your estate will receive a donation receipt for the amount of your gift, reducing—or even eliminating—final taxes.

2   Private foundations 

Private foundations (PFs) are flexible vehicles, often created to promote family philanthropy through the support of charities chosen by the founders. As registered charities, PFs can issue donation receipts when a gift is made to the foundation, even though the foundation may hold onto the gift for several years (subject to certain rules). Furthermore, since PFs are exempt from tax, the income earned on the donation grows tax free, allowing the foundation to make large contributions to other charities. PFs have become more popular over the last decade as a result of changes to the Income Tax Act, although it’s worth bearing in mind that staffing and administration requirements can make them costly and time consuming to operate.

3   Donor-advised funds

Donor-advised funds (DAFs) provide many of the same benefits as PFs without the operating costs and are the most popular choice for high-net-worth individuals wishing to make long-term contributions.

As is the case with PFs, DAFs allow benefactors to make charitable contributions without having to decide which charities will ultimately benefit from their gift immediately, allowing the funds to continue growing tax free. The donor receives an immediate donation receipt but can take time developing a charitable giving plan for disbursing the funds to individual charities.

Working with Manulife Private Wealth

To make a meaningful difference, it helps to have a ready infrastructure and support system. That’s where we can help. Through Manulife Private Wealth, our clients can access a specialized donor-advised charitable giving program to create meaningful change through a simplified experience.

Working together with your dedicated investment counsellor, we can give donors the ability to fund their preferred charities’ immediate operational needs while creating a long-term funding base to support annual charitable programs. Through smart philanthropy, we manage the complexities, while high-net-worth individuals can support their favorite charities, receive potential tax benefits, and leave a lasting philanthropic legacy.

1 University of Oregon, August 15, 2016. 2 “The Philanthropic Conversation”, BMO Harris Private Banking, GIV3 Foundation, Canadian Association of Gift Planners, Philanthropic Foundations Canada, November 5, 2014.

A widespread health crisis such as a global pandemic could cause substantial market volatility, exchange-trading suspensions and closures, and affect portfolio performance. For example, the novel coronavirus disease (COVID-19) has resulted in significant disruptions to global business activity. The impact of a health crisis and other epidemics and pandemics that may arise in the future could affect the global economy in ways that cannot necessarily be foreseen at the present time. A health crisis may exacerbate other preexisting political, social, and economic risks. Any such impact could adversely affect the portfolio’s performance, resulting in losses to your investment.

This material was prepared solely for educational and informational purposes and does not constitute a recommendation, professional advice, an offer, solicitation, or an invitation by or on behalf of Manulife Investment Management to any person to buy or sell any security. Nothing in this material constitutes investment, legal, accounting, or tax advice, or a representation that any investment or strategy is suitable or appropriate to your individual circumstances, or otherwise constitutes a personal recommendation to you.

Investing involves risks, including the potential loss of principal. Financial markets are volatile and can fluctuate significantly in response to company, industry, political, regulatory, market, or economic developments. Past performance does not guarantee future results, and you should not rely on it as the basis for making an investment decision.

Diversification does not guarantee a profit or protect against loss in any market.

Neither Manulife Private Wealth nor any other companies in the Manulife Financial Corporation (MFC) group are acting as an advisor or fiduciary to or for any recipient of this report unless otherwise agreed in writing. Neither Manulife Private Wealth or its affiliates, nor any of their directors, officers, or employees, shall assume any liability or responsibility for any direct or indirect loss or damage or any other consequence of any person acting or not acting in reliance on the information contained here. Nothing in this material constitutes investment, legal, accounting, tax, or other advice, or a representation that any investment or strategy is suitable or appropriate to your individual circumstances, or otherwise constitutes a personal recommendation to you. Manulife Private Wealth does not provide legal or tax advice, and you are encouraged to consult your own lawyer, accountant, or other advisors before making any financial decision. Prospective investors should take appropriate professional advice before making any investment decisions.

All opinions expressed were obtained from sources believed to be reliable and in good faith, no representation or warranty, expressed or implied, is made as to its accuracy or completeness. The information in this material may contain projections or other forward-looking statements regarding future events, targets, management discipline, or other expectations, and is only as current as of the date indicated. The information in this document, including statements concerning financial market trends, are based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons. Manulife Private Wealth disclaims any responsibility to update such information. Should you have any questions, please contact or ask to speak to a member of Manulife Private Wealth.

Manulife Private Wealth is a division of Manulife Investment Management Limited and Manulife Investment Management Distributors Inc. Investment services are offered by Manulife Investment Management Limited and/or Manulife Investment Management Distributors Inc. Banking services and products are offered by Manulife Bank of Canada. Wealth and estate services are offered by The Manufacturers Life Insurance Company.

Manulife, Manulife & Stylized M Design, Stylized M Design, and Manulife Private Wealth are trademarks of The Manufacturers Life Insurance Company and are used by it, and by its affiliates under license. This information does not replace or supersede KYC (know your client) suitability, needs analysis or any other regulatory requirements.

Manulife Private Wealth

Manulife Private Wealth

Manulife Private Wealth

Read bio