A few thoughts on some of the issues facing women that uniquely influence their planning decisions as indicated in BMO’s Women in Wealth report

In 2015, BMO commissioned a report called “Women in Wealth.” The findings of this report indicate that women have made incredible strides both professionally and personally in the last 50 years. For example:

  • Women are now primary breadwinners in over 31% of Canadian households
  • Women control about $1.1 trillion in personal wealth and this is expected to grow to $2.7 trillion by 2024
  • Women will inherit $900 billion in financial and real assets over the next decade
  • They also own or share ownership in almost 50% of all small businesses in Canada

However, BMO’s report also revealed several new challenges that women face today:

  • 54% of caregivers are women which can mean lost wages in order to provide care
  • Women are living longer and need to factor in health care costs
  • Women are concerned about becoming financially dependent on others as they age

So, while women have experienced financial success over the last few decades, they are also facing new challenges that uniquely influence their planning decisions.

How women are shaping the future of philanthropy in Canada
In the past, financial incapacity is cited as one of the greatest barriers to increased giving. As women control more wealth this barrier is being removed. As a result, women are shaping the future of philanthropy in ways that they have never done before.

  • New research confirms that women now want to contribute money as well as time to charities
  • They value an ongoing and meaningful relationship with the charity to which they wish to give and also want to see the impact that their gift will have
  • Millennial women are leveraging social media to make a difference in their communities and to raise awareness about causes and issues that are important to them
  • Women look at philanthropy as an opportunity to be a role model to their families and to pass on their values to the next generation
  • This desire to pass on certain philanthropic values means that women are taking a more strategic approach to their giving rather than simply writing a cheque
  • Women are creating more permanent vehicles such as private foundations and donor advised funds so that their giving can be a legacy that will be carried on by future generations

This ultimately means that because women have accumulated more wealth today and have more complex planning needs, they need to take a holistic approach to their wealth in order to ensure that their philanthropic goals can be met.

What is a Donor Advised Fund versus a Private Foundation?
A Donor Advised Fund is a giving vehicle established at a public charity such as a community foundation or an organization like Gift Funds Canada with whom BMO has partnered. It allows donors to make a charitable contribution, receive an immediate tax receipt and then recommend grants from the fund each year to various registered charities in Canada. There is very little administrative work that the individual has to deal with because the public foundation keeps financial records of donations made and issues cheques to the various charities that the donor has identified. Most Canadians create a donor advised fund as a legacy and because they are interested in supporting the same causes year after year.

A private foundation on the other hand is a registered charity usually established with a larger sum of money such as $1 million dollars. It is a philanthropic vehicle that is often used to promote family philanthropy. Family members can act as directors or trustees and assist with choosing the charities to receive funds each year as well as with day to day operations. The foundation can act as a repository for all family donations which allows gifts to be made through one entity. A private foundation is often created to fund more unique causes or issues in the community. For example, families that I have worked with research a particular issue that they want to solve for in their community and want to develop an ongoing relationship with a particular charity with the goal of seeing the impact that their donation will have and influence change in a particular sector.

What other financial options are there for making philanthropic gifts that women should be aware of?
While most Canadians donate cash to their favorite charity, there are so many other assets that women should consider donating. For example,

  • Instead of a gift of cash, donate publicly traded securities that have appreciated in value. The tax benefits of donating stock directly to a charity are more tax advantageous than cash
  • Women can also designate a charity as the beneficiary of their RRSP/RRIF. This is a good strategy for single or widowed women as the tax benefits at death are very favourable
  • Life insurance is also another way to make a large or major gift to a charity. An existing or new policy can be purchased with a charity being named as the beneficiary of the policy
  • While the reasons that Canadians give are not motivated by the tax benefits, women who own their own business and are selling their business, should give greater consideration to the tax benefits and the timing of the donation

Parting words of wisdom for women
Given the degree of wealth that women have accumulated today and the new challenges that they face, it is critical that women take the time to put a financial plan in place that looks at their wealth holistically. A wealth plan is a mix of tax planning, wealth protection, estate planning, business succession planning and philanthropy planning. This means that when looking for an advisor, women should seek out someone who looks beyond the numbers but also at their values, dreams and concerns.

Lydia Potocnik, Vice-President, Philanthropic Advisory Services, BMO Wealth Management

Lydia assists affluent clients in building a philanthropic legacy by taking a strategic approach. She guides families through the unique opportunities and strategies that exist to create a legacy that is meaningful and lasting. Her estate planning and trust administration background allow her to also ensure that clients’ philanthropic goals are part of their larger wealth and estate plan. Having worked with both clients and beneficiaries of estates, Lydia’s approach to planning takes into consideration unique family dynamics and conflict resolution.

Lydia joined BMO Wealth Planning in 2011 as a Will & Estate Planning Consultant working with clients on all aspects of their estate and trust planning. She then assumed a leadership role with BMO Trust Company where she was responsible for overseeing all aspects of the estate and trust administration business in Ontario. Prior to joining BMO, Lydia led a very successful philanthropy program at a major hospital foundation where she advised donors on how to build a lasting philanthropic legacy. She has contributed to numerous publications and media appearances related to her work.