Women embracing philanthropy with financial planning

Women embracing philanthropy with financial planning

There is good in all of us. Particularly in Canada, we all make an effort to help those in need, whether it’s making donations, attending fundraisers or volunteering with a community group. While many of us long to do more, taking greater action to tackle the struggles, injustice and suffering in the world can be daunting if you don’t have a plan.

Our research shows that many women face obstacles when it comes to engaging directly in philanthropy on a larger scale. Overall, the most frequent explanation for philanthropic absenteeism is lack of time and clarity. In addition, some feel that their family’s philanthropic endeavours have been taken care of by their partners. Some are pushed into or accept minor positions even though they have the skills, know-how and resources to take on a leading role. Some simply dislike the spotlight and prefer not to have their names recognized when cutting a large cheque. Meanwhile, most of those who donate do so without any rhyme or reason.

These are all legitimate concerns, but that doesn’t mean you should let them stand in your way. If you are fortunate to be in a position to make a greater impact through philanthropy, we say it’s time to break down the barriers and create a plan to make it happen.

Overcoming the obstacles

There are many questions and concerns that may be stopping you from taking significant philanthropic action. However, with answers to your questions and guidance to help you move forward, there is no reason for these worries to hold you back.

Here are some common worries that keep women from fulfilling their philanthropic objectives, along with insights on how to move past them:

Lack of time.

When you are a multitasker trying to wear countless hats, time can be your greatest enemy. You may have a strong desire to support a particular cause, along with ideas and money to make it happen, but where are you supposed to find the time to research, plan and engage in yet another initiative? For one thing, you can seek out help from a financial advisor or others to take on some of the work of turning your philanthropic objectives into reality.

Fear of over-committing.

Committing a significant amount of your time or money to philanthropy can be scary when there is uncertainty surrounding markets, careers or family dynamics. All of these factors can introduce an element of perceived financial instability. However, with sound planning, trusted advice and flexible safety mechanisms in place, it is possible to make a major philanthropic gift while ensuring that your family’s financial needs will always be well looked after.

Overwhelming choice, not enough clarity.

With the myriad of pleas to end poverty, protect the environment, care for animals, cure diseases and end wars, how are you supposed to decide where to direct your resources? One place to start is by considering where you can have the greatest impact. Perhaps you have existing connections in a particular field or ideas for an innovative approach to tackling an existing challenge. Talking things through with trusted friends or advisors may also help to narrow your focus and reveal a clear path forward.

Concerns about where the money goes.

If you are going to make a major financial contribution to a cause, you want to be sure that your money will be put to good use rather than disappearing into an organization’s expensive bureaucracy. It might take extra effort, but researching expense ratios and seeking assurances about how your money would be spent are an important part of the philanthropy due diligence process. While large organizations may have more bureaucracy than small charities, they may also have a greater impact due to their wider reach.

A desire to see the impact first-hand.

When people are hurting or in need, there is understandably a desire to help right now. It can be difficult to focus on long-term outcomes when people are going hungry before your eyes. Philanthropy at its best is about addressing these urgent cries for help as quickly as possible, but doing so in a sustainable manner. With a hybrid solution, you can take heart in immediate results while also working toward long-term solutions. This will have a much greater impact in the long run compared to short-term efforts that focus solely on fighting fires here and now.

Finding the right fit

So what does a good philanthropic initiative look like? It depends on what you are looking for. As a unique individual, your ideal way to engage in philanthropy may not be the same as anyone else’s.

You may already have found a cause or organization that you are passionate about, and you may already be donating to that cause. This is a good start. If you are going to be directing a significant amount of your time, energy or money toward philanthropy and supporting this cause, the following are some important considerations:

  • The cause should be something that you find personally meaningful and compelling.
  • You should have a clear understanding of the mission and impact of any organization you support before giving to ensure there is a good cultural fit.
  • You need to have a plan, and what, how and when you give needs to fit this plan to ensure that it is financially sustainable and optimized from a tax perspective.

The leap from ‘planning to give’ to a Giving Plan

Successful philanthropy does not happen by accident – it starts with a plan. Your focus is on helping others, and at Rubach Wealth we want to help you navigate the giving process with confidence and a financially sound plan to maximize the impact of your efforts.

Aside from bringing about meaningful change, philanthropic giving also has many tax advantages for donors. When thoughtfully integrated into your estate plan, philanthropy enables you to have a significant positive impact in areas that are close to your heart while at the same time taking advantage of beneficial tax structures.

Our team at Rubach Wealth designs flexible giving plans that evolve together with your financial situation and preferences. Your philanthropic objectives and capacity may change over time; with a good plan, changing beneficiaries and how much you give will not be an issue.

There are many obstacles that can make women hesitate to embrace philanthropy, but there are even more incredible reasons for seizing the opportunity to make the world a better place. If you’d like to learn more about how we can help you throughout this process, we invite you to get in touch. You have the potential to do so much good, and with a plan tailored to your needs and objectives, you can make a real difference.

 

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When a spouse or parent dies: providing support through estate planning

When a spouse or parent dies: providing support through estate planning

This is not a fun exercise, but it is an important one: imagine that you have recently passed away. Now put yourself in the shoes of your spouse or children who have survived you.

First and foremost, they are grieving. If your death was unexpected and sudden, they may also be in shock. In the days following your death, other emotions may be added to the list: confusion, summed up in the question “what happens now?”, and worry, with surviving family members wondering

“How will we manage financially now that you’re gone?”

When a spouse or parent dies_ providing support through estate planning - 2017.04.25

The grief, shock and sadness are all natural reactions that cannot – and, arguably, should not – be avoided. On the other hand, the confusion and worry can and should be mitigated as much as possible. Fortunately, you can take active steps today to minimize the potential for this added stress at a time when your family is already grappling with a great loss.

The time for estate planning is now

An estate plan provides a map for your surviving family members outlining how you would like your personal and financial affairs managed after you die. It also serves as a guiding strategy during your lifetime, helping you make the most of available legal, financial and tax tools in order to preserve your wealth, provide for your family and build your legacy.

However, the thing about plans is you have to make them ahead of time. Putting off estate planning until you’re old or sick is a bit like waiting until the last minute to book your dream holiday: you may luck out and snag a great deal, but you’re more likely to end up squished into a middle seat flying to a dodgy resort, or perhaps not being able to go on holiday at all.

The process of creating an estate plan is highly personalized, but in general it includes the following elements:

  • Identifying your priorities
  • Creating a will
  • Designating beneficiaries
  • Designating a power of attorney and executor
  • Planning for taxes
  • Organizing all important documents

Some of these steps you may not be able to do right away and some elements may require updating over time. However, the important thing is to make a start. Having an estate plan that evolves over time is natural; having no estate plan at all is like rolling the dice and hoping for the best. Starting sooner rather than later also gives you a longer period to benefit from tax-saving strategies, which can make a significant difference in long-term estate preservation.

Death doesn’t happen on schedule

Death can happen unexpectedly, but what to do when a spouse or parent dies shouldn’t be a surprise. If you were to die tomorrow, would your spouse or children know where to start when it comes to making sense of your financial affairs?

Anyone who has been in this situation can relate to the horror of stepping into a home office or opening a filing cabinet and realizing that they have no idea what to do and what to look for. This is where estate planning can help to ease the confusion and worry. If you have developed a comprehensive estate plan, your spouse and children will be spared some of this stress as there will already be clear steps in place for them to take. Depending on your personal situation, these steps may include:

  • Contacting your lawyer
  • Contacting your financial advisor
  • Calling CPP to arrange death benefits

Having a clear and comprehensive estate plan is also critical to avoid litigation. If you pass away without a will or if you fail to identify a clear beneficiary for every single asset, your estate could very easily end up in court – bogged down by lawyers, legal fees, delays and fighting. Litigation is ugly, expensive and undignified, so clearly not something you want as part of your final legacy.

It all starts with communication and planning

Nothing aside from time and support from family and friends can ease the pain of losing a spouse or parent, but it is possible to ease the stress of dealing with such a loss. By ensuring an estate plan is in place, you can give your spouse and children peace of mind and a clear path forward at a time when they are likely feeling lost.

However, it is important to recognize that estate planning goes beyond the formal elements like creating a will and designating an executor. It also includes sitting around the kitchen table speaking openly about your wishes in the event of a serious illness and your preferences regarding funeral plans. It includes ensuring that your spouse and children know where to find property deeds, account numbers and other important information about your assets. And it includes sharing your hopes and worries for the future. Whether these issues come up naturally in conversations with your loved ones or you organize a family meeting specifically to talk about them, what’s important is that you have these discussions.

Thinking about your own mortality can be grim business, let alone planning ahead for your eventual death. However, when viewed as an opportunity to ease the emotional stress your family will face when you die, suddenly the importance and value of estate planning become clear.

Lawyers play a big role in preparing the legal components of an estate plan, but in general they are focused only on executing your instructions. In contrast, financial advisors can work with you to guide the process of estate planning and develop strategies that match your needs. At Rubach Wealth, we can help you build a robust estate plan to ensure that your family is well taken care of now and in the future, come what may. Contact us today to discuss how we can support you and your family.

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Using an Estate Freeze to Protect Your Assets

Using an Estate Freeze to Protect Your Assets

If you were to die yesterday, what would happen to your assets?

If you’re unsure of the answer to that question, you are not alone. Most Canadians are aware that they need a will with clear direction on where their assets should go upon death. But how to maximize the inheritance left for your loved ones is still a mystery to many.

We will explore the fundamentals on where to start to implement an estate freeze that’ll limit taxes and ensure assets are allocated properly.

CREATING A WILL

Creating a will is the easy part. To properly create a will and put together a comprehensive estate plan, you should visit an estate lawyer. It is important to visit a professional in order to ensure your directions are clear at time of death. While it may be tempting to do-it-yourself, a lawyer will ensure all of your assets go exactly where you want them to go and also provide valuable advice, especially regarding topics and those ‘what if’s’ most of us don’t want think about.

An estate lawyer will ensure a plan is in place for the guardianship of your children and outline the distribution of your wealth.

HOW TO KEEP YOUR MONEY YOURS 

Unlike other countries, there is no inheritance tax in Canada. Your assets roll over to your beneficiaries tax-free. However, many people do not realize that due to the deemed disposition rules of the Income Tax Act of Canada, if you do not have a spouse to leave your belongings to at death, your assets will be disposed of at fair market value (note that you can roll over assets to your spouse tax-free). In other words, you will pay tax on capital gains made on your investments or properties. If your assets have grown in value since you earned them, you may have to pay income tax on the taxable part.

Let’s assume you own shares in a private company that have a current valuation of $50,000. When you obtained these shares, the approximate value was $25,000. Upon death, Revenue Canada will deem these shares as “sold” at the current fair market value. So, if your marginal tax rate is 45%, your estate would pay 45% of half of the capital gained on the shares or $5,625.

estate freeze to protect assets

To avoid paying tax on assets that may appreciate in value over time (such as shares in a private company), consider an estate freeze. Put simply, an estate freeze means locking in the current value (and tax owed) that you would be liable to pay upon death. This technique can be especially beneficial for owners of a private company, where a large part of their net worth comes from the shares of the corporation.

An estate freeze can help transfer all future growth of the corporation to heirs and limit the overall tax burden at death.

IMPLEMENTING AN ESTATE FREEZE

The easiest way to implement an estate freeze is to exchange the common shares (growth shares) for new preferred shares that are fixed in value. These preferred shares will not appreciate in value, rather their worth will remain frozen. You can issue new common shares that will be placed in a family trust for your children or heirs and direct future growth of the company to accumulate in these new shares. In the future, this money may be able to be distributed to your children tax-free. Other options, such as creating a new holding company for these shares, are also possible to achieve tax deferment.

Implementing an estate freeze will not eliminate tax that has accrued to date on your assets. However, a well-timed estate freeze will limit the amount of tax you need to pay in the future and ensure your assets are largely left intact for your family, rather than for the government.

An estate freeze can be a beneficial, albeit complex transaction, that is best utilized under the guidance of an experienced lawyer and tax accountant.