Succession Planning with a Twist

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“I wish I had known about Abundance Canada before I set up my private foundation.”

This is a phrase we often hear when a client transfers their private foundation to an Abundance Canada donor-advised fund.

Inspired to share their wealth and wanting to create a lasting legacy of generosity, many people establish private foundations, only to find they are inundated by grant applications, onerous administrative tasks, and reporting requirements.

Chris and Leslie* had such an experience. With no family members interested in taking over their business when they were ready to step away, they sold it. Philanthropy had long been a part of their succession plan, so they applied their entrepreneurial skills to setting up and running their own private foundation. Ten years later, with firsthand experience of how much work was involved — the rules and regulations, compliance and reporting requirements, not to mention the lack of privacy — Chris and Leslie realized they might never have started their own foundation if they had known about these challenges.

Abundance Canada has worked with many people who have set up private foundations only to discover the administrative work and lack of privacy significantly reduced their joy of being generous. Here's an alternative solution… Click To Tweet

The Administrative Burden of a Private Foundation

The administrative workload often overshadowed the joy they felt when making their grants to the various causes they supported. The random calls and letters from charities that had researched their foundation on the Canada Revenue Agency (CRA) website and were looking to apply for grants brought more unpleasant surprises. Chris joked that their “private” foundation was less private and more work than their business had been.

When Chris and Leslie approached their family members to see if anyone might assist them, no one had the time or interest in taking over their private foundation. This was a part of their succession plan they had never considered. What would happen when they were no longer willing or able to operate their foundation?

Chris and Leslie decided to explore their options with the same advisor who had assisted them in setting up their foundation. Their advisor confirmed that the administrative work and compliance were unavoidable. Hiring people to take over these responsibilities was one option. The lack of privacy was another challenge because the CRA provides public information on all foundations, including their financial information, board members, names of charities receiving support and amounts granted to each charity.

An Answer to Succession Planning for Your Foundation

In response to their questions about succession planning for their foundation, their advisor asked if they had ever considered a public foundation that offered donor-advised funds. Chris and Leslie had never heard of donor-advised funds, so their advisor gave them a list of public foundations that offered this service. Abundance Canada was on that list.

When Chris and Leslie contacted us, we assured them that their story was not unique. (Abundance Canada has worked with many people who have set up private foundations only to discover the administrative work and lack of privacy significantly reduced their joy of being generous.) We outlined how Abundance Canada could take over the administration and compliance work, allow them the level of privacy they desired, make grants to their recommended charities, and continue that support when Chris and Leslie were no longer able to provide these recommendations.

An Alternative to a Private Foundation

Chris and Leslie were thrilled to find a viable option that checked all the boxes on their wish list. They eventually decided to transfer all the assets from their private foundation to a donor-advised fund at Abundance Canada and close their foundation. This freed them from all the administrative work while maintaining the joy of recommending which charities should receive grants from their Abundance Canada Gifting Fund™**. As an added bonus, they could designate which charities would receive their personal contact information and which grants would be made anonymously.

Many philanthropists find it comforting to know that there is an alternative to establishing and operating a private foundation. For those that have a private foundation, the option to use a donor-advised fund at a public foundation as a succession plan gives them peace of mind. After all, the goal is to keep the joy in your generosity.

Rick Braun-Janzen, Interim Director of Finance

Rick Braun-Janzen is the Director of Gift Planning at Abundance Canada

*Names changed for anonymity
**Gifting Fund™ is the term Abundance Canada uses for its donor-advised funds.­

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