Managing Your Money

It started out as a discussion around financial goals and concerns and spring boarded into the creation of a lasting family legacy. Allan and May Hudson, (*names and details have been changed) were revising their estate plan with the simple intention up updating their will.  Their children were no longer minors, and they now had eight grandchildren. Talk of financial and tax concerns about their estate led us down a path to deeper emotional concerns that they were having about aging, and eventually passing on.

Their three children, busy with life in general, and spread by distance around the world, rarely had the opportunity to come together at the same time, but for events related to their parents.  Allan and May worried that once they were gone, their kids would lose that connection which was already hard to hold together.  It was important to them to keep their children and grandchildren grounded to family values and to each other.

Allan and May had been long time supporters of the arts, medical research and underprivileged children, having supported adopted children in Africa since their own children were very young. Their current last will and testament which was prepared many moons ago, when their children were still minors, left only small amounts to charity, as they didn’t have much money at the time. While they have always been generous in their annual giving, they wanted to do more, and ideally, while they were alive. They were also concerned about preserving their estate from taxes in order to maximize what is left for their children and grandchildren.

Bringing these ideas together we decided to establish a “mini-foundation”. They took the opportunity while celebrating their 50th wedding anniversary during a family trip, to discuss the idea with their three children who were all together. The goal of the “mini-foundation” was not only for ‘giving’ purposes but to bring the family together, at least once a year. These annual family meetings which they agreed could be done via Skype or some other technology; would be to recommend and determine the charity that would receive the gift each year. They hoped their children and grandchildren would bring forth causes that were near and dear to each of them and present a case for choosing that charity for the year. Allan and May decided to contribute an initial amount of $100,000 (the minimum is $25,000).  Their intention was to keep the initial contribution amount intact, and only use the interest generated by that amount.  This would mean that the “mini-foundation” would live on indefinitely and hopefully for the great grandchildren and great great grandchildren. Everyone was on board with Allan and May’s plan and they are currently looking forward to the “first annual family foundation” meeting this summer in Allan and May’s back yard.

Though Allan and May were not motivated to do this because of tax incentives, those benefits certainly help! The $100,000 amount that they started with had a $22,000 capital gain on it. The normal tax liability on this was avoided by using their “mini-foundation”. On top of that, they receive a receipt for the full donation amount of $100,000 (unused credits can be carried forward up to 5 years).

Once they understood all the details of the plan, their children unanimously volunteered to also contribute to the “mini-foundation” in the name of their parents. Their older son who lives in the U.S. has a financial background and will be involved in the investment management of the “mini-foundation” account, with a goal of obtaining at least 3.5% annually, which is the minimum amount that the Canada Revenue Agency (CRA) requires to be dispersed annually to a charity through this type of plan.

One of their grandchildren has already been on two mission trips to Haiti to help victims of natural disasters.  Another is a medical student with plans to find a cure for Alzheimer’s. Allan and May have received quite a few emails from their eight grandchildren, either simply excited about the idea, or proposing great “causes” to help. Their middle daughter will be travelling to Montreal this summer with her children for the main reason of being present for the first annual meeting. They are hoping that this will turn into an annual “excuse” to get together in person rather than simply online, but time will tell.

With minimal administration and costs on their part in establishing and running their own mini charitable foundation, Allan and May are excited to seeing the evolution of this project. Creating a lasting family legacy in this case couldn’t have been simpler.

This is an irrevocable gift. So it’s important to discuss this type of goal with your advisor in the context of your overall wealth management strategy.  Although this story may sound simple enough, there are actually many moving parts in this type of plan that must be considered. Ensure you are working with professionals who are knowledgeable in all aspects of the plan. It is a wonderful way to support causes that you care about in a simple, smart, tax- effective and lasting way.

It’s also an easy way to invite other family members, friends, and colleagues to get involved in your ‘causes’ as well.

Lynn MacNeil, F.PL. Vice President, Investment Advisor, is a Financial Planner with Richardson GMP Limited in Montreal, with over 24 years of experience working with retirees and pre-retirees. For a second opinion, private financial consultation, or more information on this topic or on any other investment or financial matter, please contact Lynn MacNeil at 514.981.5795 or [email protected]. Or visit our website at

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