Law Times

Law Times • October 21, 2013 Page 13 FOCUS Charitable giving not always so easy Clients advised to avoid common errors in donating fortunes BY MICHAEL McKIERNAN For Law Times T he Warren Buffetts and Bill Gateses of the world make it look easy, but giving away your fortune to charity is tougher than it looks, especially if you're dead at the time. Elena Hoffstein, a partner at Fasken Martineau DuMoulin LLP with a personal tax and estate planning practice, says there are numerous potential pitfalls for people who decide to make charitable donations as part of their will. "Charitable giving on death is really no different than during your lifetime except that you're no longer around to have a discussion," says Hoffstein, who notes the distinction makes it even more important that the testator get it right the first time. "Make sure the gift is appropriate for the charity. And sometimes it's easier said than done, but the counsel of perfection is to talk to the charity ahead of time," she adds. A recent Statistics Canada study showed that in 2011, 5.7 million people reported giving a total of $8.5 billion to charities. Although the total number of donors was down from the previous year, they contributed more money. Clay Hudson, a partner with Shibley Righton LLP in Toronto, expects both numbers to rise in the future. "The economy does impact on charitable giving," says Hudson. "A few years ago, I talked with a lawyer at one of the biggest charities in Canada who told me you can track recessions on the basis of giving profiles." And while individual donors may not contribute every year, there's still one life event that People can boost the value of an estate in some cases by donating publicly traded securities to charities, says Clay Hudson. charities can rely on for providing a big windfall: death. "It's easier to give in a will and often you have more to give. During your lifetime, you always feel you need some left over for yourself," says Hoffstein. She puts the rising popularity of charitable giving down in part to high-profile philanthropy by people like Buffett and Gates. "A lot of people are jumping on that bandwagon. There is a feeling when someone has built up great wealth that their children don't need all that money, which leaves more for charities. That feeling has increased over time. They're still leaving kids a lot in wills but not everything because it just feels like too much." In addition, she says people look for the tax efficiencies a well-managed charitable gift can provide for donors. Hudson says it's even possible to boost the value of an estate in certain circumstances by donating publicly traded securities to charities. By gifting charities shares that have appreciated significantly in value, donors can get a tax credit for the full amount without paying the capital gains tax that would otherwise apply if they were to sell them in order to give the cash to the organization. When it comes to estates, donors who use up their full allotment of tax credits in the year before their death can carry them back another year. "By making some strategic charitable gifts and getting the tax credit into the previous year, you can increase the value of the estate," says Hudson, who's trying to spread the word to both charities and their major donors. "Some of the charities understand but a lot don't." Despite the complexity of some wills, Hoffstein says it's the mundane details that most commonly cause problems for donors. Those who use the wrong name for a charity by, for example, confusing provincial and national organizations for the same cause can put their donation at risk, especially if it's ambiguous enough to result in competing claims for the gift. "Another example would be if a church splits apart and different congregations take similar names. If the person doing the will doesn't differentiate between them, that could lead to all sorts of expensive problems," says Hoffstein. Another common mistake potential donors make is bequeathing an unwanted gift to a charity, according to Hoffstein. "Sometimes charities do want to look a gift horse in the mouth," she says, noting she once represented a charity offered a timeshare property in the United States. "Receiving illiquid assets poses a real challenge for a charity because they have to meet certain spending requirements each year." Hoffstein says charities can get very picky about donations, even cash ones, when they come with conditions attached. Some donors want their money used only for research purposes or even for particular projects carried out by the charity. Others restrict the kinds of investments a charity can make with the money sometimes based on religious or moral reasons. "The charity is not obliged to accept the gift if it goes against its philosophy and might walk away," says Hoffstein. "For example, a number of gifts go to universities to set up scholarships and you can see that if certain nationalities or races were excluded from being recipients, they might be inclined to reject the gift." In the case of failed gifts, charities can make a cy-pres application to the court in order to save the donation and apply it to a similar purpose. But Daniel Dochylo, a partner at the Toronto office of Borden Ladner Gervais LLP, says the traditional approach by the courts to such applications can cause difficulties as the charity must prove a general charitable intention on the part of the donor before making a cy-pres order. "It might be better, as some law reform commissions suggest, that the presumption is when I make a gift, even if it's for a specific purpose, that there was a general charitable intention and it can be applied by the charity to some other similar purpose," says Dochylo. "It strikes me that maybe the law should provide for more certainty by way of a presumption rather than leaving it to the potential vagaries of textual interpretation." LT TRUST you're putting your reputation on the line. It's all about trust well placed. Estates decision a must-read Continued from page 10 Caterina was not meeting with him of her own volition or that she did not know what she was doing," wrote Penny. Jasmine Sweatman of Sweatman Law Firm says Penny's decision on capacity is a vote of confidence for lawyers as the gatekeepers of testamentary capacity. "Too often, lawyers think just because someone is 85, they'd better send them off to the doctor for a capacity assessment," she says. "I thought this was a really down-to-earth, practical decision that is very supportive of general sole practitioners and the realities of what we deal with." According to Ticker, the Gironda decision is a must-read for estate litigators because of the number of issues it raised, Penny's thorough discussion of the law, and the shifting burdens of proof in each instance. In addition to the findings on the 2005 will, Penny voided the subsequent transfer of Caterina's home to Vito for $2 after finding she had lacked the capacity to complete that transaction by 2008. The judge also removed Vito as guardian for Caterina's personal care and property. He found he wasn't an appropriate attorney for either matter given his "disturbing willingness to treat his mother's money as his own" and his frequent "threats and angry outbursts toward his mother's caregivers" at the retirement home where she now lives. Two of his older brothers replaced Vito in those roles. "I could see it being used as part of a curriculum because it basically just takes all the various heads of estates litigation and goes through everything you need to know about the law," says Ticker. LT ALEKS MLADENOVIC | RICHARD HALPERN | SLOAN MANDEL Since 1936 Thomson, Rogers has built a strong, trusting, and collegial relationship with hundreds of lawyers across the province. As a law firm specializing in civil litigation, we have a record of accomplishment second to none. With a group of 30 litigators and a support staff of over 100 people, we have the resources to achieve the best possible result for your client. Moreover, we are exceptionally fair when it comes to referral fees. We welcome the chance to speak or meet with you about any potential referral. We look forward to creating a solid relationship with you that will benefit the clients we serve. YOUR ADVANTAGE, in and out of the courtroom. TF: 1.888.223.0448 T: 416.868.3100 W: www.thomsonrogers.com www.lawtimesnews.com Untitled-1 1 13-08-13 7:19 AM

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