Billions of dollars flow from Canadians to charities through their wills. Now, gift planners say charities need to be thinking a lot more about it as a fundraising strategy – across all demographics.
For a long time, “legacy gift planning” might have sounded to the average young person like something only a wealthy grandparent would think about. Maybe they’d leave a big chunk of money to a hospital foundation or name a university alma mater in their will after a long life of financial success.
But gift planning has had a bit of a revamp in recent years. It’s now what the Canadian Association of Gift Planners describes as a “democratized landscape.” It isn’t, they emphasize, just a small cohort of tax planners and the wealthy. Instead, it’s accessible to everyone – a possibility for anyone, of any age, in almost any income bracket, to make a donation to a charity or non-profit they support.
People who want to make a legacy gift come from all walks of life, and they come from many different ages. We’re not just talking to older people anymore.
Jill Nelson, Global Philanthropic Canada
“People who want to make a legacy gift come from all walks of life, and they come from many different ages,” says Jill Nelson, a senior consultant with Global Philanthropic Canada. “We’re not just talking to older people anymore,” she adds. “There was this traditional view of people considering giving through their estates once they reached an older age,” she says. “But younger generations are really concerned about community and society and making the world better. And we’re seeing younger people seeing how they can benefit a cause that matters to them by putting a gift in their will.”
And for fundraisers, gift planning is increasingly being recognized as a crucial source of funding to consider, alongside annual donations and major donors. Billions of dollars now flow from Canadians to charities and non-profits through legacy gifts.
Gift planning is on the rise
As baby boomers age, forecasters have projected that we’re in the midst of “the biggest generational transfer of wealth in human history.”
In Canada, it’s estimated that $1.6 trillion will change hands by 2030, as Canadians leave money to the next generation. That’s tied to demographic shifts. “There’s significant aging in the population,” says Allen Davidov, senior vice president and practice leader at Environics Analytics. And that aging is happening at “a rapid pace,” he says, pointing to data showing that close to a quarter of Canadians will be over 65 by 2036. He notes that the data shows, on average, that financial assets steadily climb with age and there is a significant concentration of financial wealth among older Canadians. And as they age, that segment of the population is already beginning to transfer their wealth.
That golden age of planned gifts and getting at all those funds: it started a couple of years ago.
Allen Davidov, Environics Analytics
One thing is clear: what is named in Canadians’ wills going forward will have a big impact on the future of Canada – our wealth distribution, our support of organizations working for the social good, the services available to the most vulnerable, and more. “That golden age of planned gifts and getting at all those funds: it started a couple of years ago,” Davidov says. “We’ve been on the horn saying, ‘If you haven’t thought about it, you should be thinking about it right now, because it’s really crucial.’”
Proponents of gift planning are quick to tout its benefits. “Making a charitable gift in your will is a great way to benefit the community and save taxes,” writes CIBC’s director of philanthropy and legacy planning. “A charitable gift in your will can reduce the taxes owed, and in some cases even eliminate them, while leaving the same amount of money to heirs,” writes one wealth advisor.
But currently, fewer than one in 10 Canadians name charities in their wills.
Some in the industry hope that the amount left to charities will increase in the years to come, as younger generations become familiar with gift planning. The Canadian Association of Gift Planners (CAGP) is at the forefront, with an awareness campaign called Will Power, an initiative of the CAGP and the CAGP Foundation that has a clear goal to raise the percentage of Canadians leaving donations in their wills from 8% to 13% by 2030.
CAGP says that, if successful, that would mean Canadians would contribute as much as $58 billion dollars to charities, non-profits, and other social causes. Overseas, Legacy Futures, a UK-based business with a stated purpose “to help charities grow through legacy giving,” says charity legacy income is expected to double by 2050, with the amount left to charity already on the rise.
The CAGP campaign has already seen success, too. Between 2019 and 2022, the portion of Canadians donating to charities in their wills increased from 5% to 8%, according to a poll conducted in November 2022. That increase means an expected $37 billion in future donations. According to the poll, another 22% of Canadians are considering including charitable donations in their wills – with the majority of them being under 50.
Big world events trigger people thinking about their wills, or creating a will.
Allen Davidov
Awareness campaigns certainly help increase knowledge of gift planning. And as Davidov points out, people tend to think about their wills in uncertain or tumultuous times – whether personally or more broadly. “Big world events trigger people thinking about their wills, or creating a will,” he says, citing the COVID-19 pandemic as an example. “That’s when you kind of revisit ‘Do I have a will? What would happen?’”
Younger generations are also becoming more “savvy and thoughtful” when it comes to tax strategy and incorporating charitable gifts in their wills, Davidov adds.
That’s hopeful news for charities and non-profits who are wondering how they will fund their operations during turbulent political times.
How does it work?
Gift planning stems from the fact that the Canadian government has afforded tax benefits to people who make charitable donations. Most Canadians are familiar with the concept of donating to a charity – and then receiving an income tax receipt that enables them to get some of that money back from the taxes they owe. According to Nelson, people generally receive almost half the amount they donate back from their taxes, though this varies based on their province of residence.
Those savings can also apply after death. “When somebody passes away, the whole estate is treated as though it was sold the day before you died,” Nelson says. “So it triggers capital gains, and your registered funds are brought into income as if you’d earned all that income that year. All of a sudden you’re in a much higher tax bracket than you’ve ever been in during your lifetime.” And that can leave your heirs with a large tax bill.
Your estate can go to your heirs, to tax to the government, or to charity. Pick two.
Jill Nelson
But a person who has planned in their will to leave a gift to charity will get a tax receipt, which, Nelson says, will often completely nullify tax owed. As the saying goes, she says, “your estate can go to your heirs, to tax to the government, or to charity. Pick two.”
Nelson also points out that it’s not just money that can be donated. Publicly traded securities and gifts from holding companies are other examples of gifts that can be left to charities. And, she stresses, this is not something available only to wealthy Canadians. “People of moderate means can leave a significant gift,” she says. “Most of us need our money to live on while we’re alive, and really the greatest availability is when we pass away.”
People of moderate means can leave a significant gift.
Jill Nelson
Taking into account house prices, she adds, “really many of us will never be so rich as when our estate sells our house.” Davidov echoes this idea: “People have a lot more to donate than they ever thought was possible.”
New ways of thinking about charity for wealth holders
Even though leaving a gift to charity is increasingly a tool for a wider cross-section of Canadians, it remains true that the majority of wealth in Canada is held by a relatively small portion of wealthy people. According to Statistics Canada, when it comes to wealth accumulation the top 20% of the population accounts for more than two-thirds of Canada’s total net worth. And for those people, gifts to charity might not – or should not – wait until a person has died. It’s a trend Davidov has seen play out in the data. “We’ve started seeing a trend that people are looking at their wills and giving money before they pass,” he says, noting there are myriad reasons a person might gift their wealth sooner, including wanting to see the impact in their lifetimes, cultural reasons, or responding to current events.
Lisa Wolverton of Forward Global encourages foundations and wealth-holding Canadians to think outside the box when it comes to charity. “We live in this really anxious society where people are fighting for scarce resources as we’re going from one crisis to the next,” she says. “We try to come from a standpoint of thinking abundantly.”
The collection of funders at Forward Global – a global community of some 400 individual and family wealth holders – are asking big questions about how those with means can best allocate efforts to make an impact in the world, Wolverton says: “How do we transform philanthropy? How do we change the mindset around giving?” And, importantly, “How do we shift from a culture where the goal is to maximize individual financial wealth to a culture where the goal is collective holistic well-being?”
What do you need to have enough for you and your family in your life, and then what is left over? And how do you get that out the door with a sense of urgency?
Lisa Wolverton, Forward Global
Society is faced with immediate and enormous crises like climate change, as well as challenges like democracy and artificial intelligence. Those all have “tipping points on the horizon and a really short window for impact,” Wolverton says. Members of the Forward Global community, she says, are thinking about “really deploying money quickly with a sense of urgency, and really with a strategy behind it.”
The key to this moment, she says, is that urgency – and making amends with giving away money. Wolverton has been ruminating on the idea of “enough-ness.” “What does it mean to have enough in your life? What do you need to have enough for you and your family in your life, and then what is left over?” she asks. And “how do you get that out the door with a sense of urgency?”
That can mean a lot of things. It can mean substantial gifts in one’s lifetime. It can mean living with less. It can mean spending down. It also might mean not thinking about one’s legacy as being something that carries on in perpetuity. For some at Forward Global, Wolverton says, the thinking has been “putting humanity before perpetuity.”
What should charities be doing?
Gift-planning experts agree on one key fundraising conclusion: charities aren’t thinking enough about legacy gifts as part of a fundraising strategy. “This is really a key moment,” Davidov says. “If there are charities out there that are not thinking about planned giving, they should be – at any size of organization. [They should be] really getting an understanding of how to steward their donors.”
This is really a key moment. If there are charities out there that are not thinking about planned giving, they should be – at any size of organization.
Allen Davidov
Nelson acknowledges that asking supporters to think about donating to your charity or non-profit when they die can be awkward for fundraisers. For many of us, death is an uncomfortable subject.
She recommends that fundraisers focus on the impact of gifts like this when gently encouraging supporters to consider a gift in their wills. “We don’t call up every supporter and say, ‘Hey, you know you’re going to die someday,’” she says, acknowledging the delicacy of broaching the subject with donors. “We’re painting the picture by sharing testimonials of people who made this kind of gift and how they feel about it, sometimes how their families feel about it, and often the kind of impact it’s having on the cause they care about.”
“We let people make their own minds up, put their hands up, and come to us.”
The sources interviewed for this article will all be presenting at the CAGP conference in April in Edmonton.
