This text is part of the special section Philanthropy
When families or wealthy individuals create their own foundation, they do not derive any tax benefit from it, compared to a pure donation which would mobilize the same financial resources. What they are looking for then is to have an influence. And for this to be even greater, they are increasingly turning to social and responsible approaches, even in their investments.
“We don’t create a foundation to save money, but to give because we have a lot of it. The founders feel an important responsibility and want to contribute to society,” underlines philanthropy expert Daniel Asselin.
François Bernier, director of tax and estate planning for Eastern Canada at Sun Life Global Investments, confirms that creating a foundation is not more advantageous from a tax point of view than an outright donation to a charitable organization. registered charity. “We are entitled to the same receipts and tax credits as for a direct donation to a charity, depending on the amount of the donation and the level of income”, he describes.
A desire for sustainability
By giving birth to their foundation, major donors rather seek to create a kind of brand in relation to their name or their family and the causes they wish to support in the long term. “Some have given their lives to causes and would like them to continue to benefit after their death through their heritage. There is usually a desire for sustainability; we don’t want to create a foundation that will wither after ten years due to a lack of funds”, observes François Bernier.
This structure also constitutes, for the founders, a tool for managing donations over time. “They can put money into it today and get their tax receipt, then gradually allocate money to different charities they want to support instead of giving all their donations at once to a charity whose mission can change tomorrow or whose administration can be changed,” explains the tax expert.
Impact investments
Since 1er Last January, large private foundations with capital of $1 million or more are required to distribute 5% of their assets each year to other charities. Mandatory distributions for smaller foundations remained at 3.5%. The fate of the remaining 95% (or 96.5%) of assets is changing.
Traditionally, foundations believed that a maximum return on their investments on the financial markets would ensure the sustainability of the organization and increase the amount of donations. “A new stance considers that the primary mission of a foundation is not to generate profits on its investments — so much the better if they do so — but to act in a relevant way at all levels of their philanthropic actions to achieve the common good”, observed Jacques Bordeleau, former director general of the Béati foundation, in an interview given to PhiLab last fall.
The McConnell Foundation, which pioneered this approach in 2007, now dedicates 20% of its portfolio to impact investments aligned with its mission, a proportion it has announced it wants to increase to 100%. This responsible investment movement, followed in particular by the Trottier, Lucie and André Chagnon and Beati foundations, “is a wave that will continue to last”, according to François Bernier.
A challenge for the years to come
“We must be even more demanding on the way in which a dollar, which has been tax-exempted in philanthropy, is placed on the markets,” underlines for his part the President and CEO of the Foundation of Greater Montreal, Karel Mayrand. It also advocates investments based on the same values that guide grant distributions. “If the tens of billions of philanthropic dollars on the market were invested in this way, we would completely change the dynamic to do good with 100% of the capital per year and not 5%”, he encourages.
For Mr. Mayrand, the effects of philanthropy on the fundamental issues of our society are a challenge in a growing sector. “Philanthropy has become a market in which more and more players have entered within financial institutions and family or managerial offices, but this raises a question: does this philanthropy really have an impact on our basic needs? ? asks the CEO For him, the challenge for the next few years is to manage to structure and direct all the waves of money to seek concrete impact beyond tax optimization.
“In the 800 funds that we have at the Foundation of Greater Montreal, I am able to say where the money goes and how it is distributed, but at the more global level of the philanthropy market, it is difficult to know where the money goes. donations that have had charitable receipts and what their impact has been,” he laments.
How much money does it take to create a foundation?
This special content was produced by the Special Publications team of the Duty, relating to marketing. The drafting of Duty did not take part.