Frequently Asked Questions
Our commitment to service means that we answer lots of questions from donors, prospective donors, professional advisors and not-for-profit organizations on a wide variety of topics. Listed below, you will find many of the questions we are most frequently asked. If you don't see your particular question answered, then drop us a line at contactus@giftfunds.com. We'll be happy to assist you.
Q. What is a Charitable Gift Fund?
A. The charitable gift fund program offered by Gift Funds Canada:
- promotes the establishment of Charitable Gift Funds (CGF) which are essentially donor-advised funds.
- offers individuals and/or families the opportunity to make contributions to their own perpetual gift fund account within the Foundation. Donation receipts are issued to the donors for the full value of the assets donated in the year the contribution is made.
- enables individuals and families with philanthropic interests to plan their charitable giving over time and maximize its impact. Donors who choose to create a CGF can recommend grants to qualified charities and not-for-profit organizations of their choice, according to their wishes and timetables.
- encourages donors to make recommendations on how their gifts are invested to increase the granting power of the fund.
- prudently invests and administers the contributed assets.
- supports the established relationship between professional advisors and their client/donors by offering these 'advisor-managed' funds for charitable giving.
Q. Why create a Charitable Gift Fund rather than starting a private foundation?
A. Starting a private foundation in Canada can involve considerable start-up costs and ongoing administrative obligations and expenses, such as the annual filing of CRA public information returns. But one of the most important differences is the fact that donors can maintain anonymity in their charitable giving by working with Gift Funds Canada. Creating a Charitable Gift Fund with the Foundation using appreciated securities will yield significant tax advantages, as any capital gain realized by making the gift will be fully exempt from taxation.
Q. What is the difference between a CLASSIC & a FLEX Charitable Gift Fund?
A. The charitable gift fund program offers two different types of funds to best match the donors' short, mid & long-term plans as well as their grant-making style:
- A CLASSIC fund is a traditional endowment fund established to create a lasting legacy. The objective is to protect the capital and grow it slowly over time through a balanced investment. The annual money available to grant is determined by a calculation applied by the Foundation to the CGF's assets and funded from the CGF's net accumulated income. The target is usually 4-5% of the fund's capital. There is no encroachment on the gift capital for a minimum of ten (10) years.
- A FLEX fund offers individuals and/or families the opportunity to highly customize their CGF to fulfill their short, mid &/or long-term charitable objectives. The investment strategy for the gift capital in the fund is tailored to satisfy the donors' grant-making plans and timelines. All of the gift capital is available for grant-making at any time although there are minimum costs to be covered.
Creating a Charitable Gift Fund
Q. Who should be listed as the donor?
A. The primary donor is the person or persons responsible for making the initial contribution(s) to the charitable gift fund. If the contributions come from a variety of sources or from jointly owned assets, then multiple donors can be listed. If the donor wants non-contributors to have granting rights on the fund, those individuals should be named as grant advisors.
Q. What is a Grant Advisor?
A. A grant advisor is named by the primary donor to have authority to recommend grants on the CGF. Usually a spouse, life partner, child or grandchild of a mature age can be named as a grant advisor.
Q. What is a Successor?
A. A successor is a person identified by the primary donor to take over responsibility for the fund after the donor's death. Multiple successors can be named on a fund and, depending on the donor's wishes, the assets on account can be split equally among the successors or they can share the responsibilities for the management of one fund jointly. Successors can also name future successors to take over responsibility for the fund in the event of their death.
Q. Can Charitable Gift Funds be named?
A. The donor can choose any name for the CGF. We recommend that the donor's name and/or the main area of interest for the fund be used (e.g., The Smith Family Fund for the Arts).
Q. Can my children get involved with the Charitable Gift Fund?
A. With proper guidance from an adult, your children or grandchildren can get involved immediately. If your children are of legal age, you can engage them as donor-advisors on your account. In that capacity, they can recommend grants to qualified organizations. If you would like to name your children to succeed you as donor-advisor(s) to the account after your death, they can be named as successors of the account.
Charitable Gift Fund Contributions
Q. What are the minimum amounts needed to create either a CLASSIC or FLEX Charitable Gift Fund?
A. The minimum contribution required to create and maintain a fund is $25,000 (Classic) or $100,000 (Flex).
Q. Is there an additional contribution minimum?
A. Yes, each additional gift contribution to the existing fund must be at least $250.00.
Q. How often may donors make contributions to their fund(s)?
A. As often as they wish. Some people like to add to their funds right after recommending grants each year or before the end of the tax year. Others make additional contributions regularly to build up the asset base on which investment earnings accrue for future grantmaking.
Q. When is the contribution considered a charitable gift?
A. A contribution is complete when the ownership of the donated asset has been successfully transferred to and received by the Foundation. The chart above describes when a contribution to Gift Funds Canada is considered a completed transaction. The chart is organized by contribution type, form and date.
Q. Are additional contributions to the fund eligible for a donation receipt?
A. Yes. Donors will be eligible for a donation receipt on the date the contribution is made to the fund. This donation receipt may be used to claim tax credits in the year the gift is made. Any unused credits may be carried forward to use against future income for a further five-year period. Donors may wish to consult a tax advisor to review their personal situation. Donors will receive a consolidated statement of annual contributions and granting activity following the end of the Foundation's fiscal year.
Q. What types of assets can be contributed?
A. Cash, publicly listed securities, segregated fund and mutual fund units are all eligible. Contact the Foundation at 1-866-712-5988 to confirm the eligibility of other asset types. Their transfer may result in timing delays and involve additional costs and special instructions.
Q. What type of asset is best to contribute?
A. Appreciated securities that have enjoyed a significant capital gain make the most effective contributions (including stock options and mutual fund units). Donors receive a donation receipt for the full fair market value (FMV) of their gift, and eliminate the tax owing on the capital gain realized. Tax credits can be used to reduce income taxes owing on other income and excess credits may be carried forward for five additional years. These advantages may enable a donor to give more than they had originally anticipated to the causes they value and support.
Q. Can donors contribute shares of foreign companies?
A. Yes, if they're listed on approved stock exchanges.
Q. Can donors transfer assets from another Charitable Gift Fund?
A. Yes, generally charitable gift fund plans allow donors to transfer funds from one program to another. Donors simply recommend a grant from their existing account to a new account within the Foundation. The grant will be made payable to Gift Funds Canada in care of the donor's new account. When the grant is transferred, the funds will be credited to the donor's new account. This event is not taxable as the donor has already received a donation receipt for the contributions made to the original Charitable Gift Fund.
Q. What about the investment income earned by a CGF?
A. Income earned by the invested assets in a CGF is not eligible for a donation receipt; only original contributions made by a donor are eligible for tax credits.
Q. How is the value of a donation receipt determined?
A. The value of the contribution is determined on the date it arrives in the Foundation's gift receipt account. For contributions of securities, the donation receipt for the gifted assets will be either the sale price if sold on the day of transfer of ownership or the closing price on the transfer day.
Q. How quickly are contributions processed?
A. Publicly traded securities are usually liquidated as soon as possible after the Foundation receives them.
Q. What is the last day this year that donors can still make a contribution to receive a donation receipt?
A. For gift of cash, donors must be able to show that the contribution left their possession as an irrevocable transfer to the Foundation before the end of the calendar year. For publicly traded mutual funds, stocks and bonds the asset transfer must be initiated in time for the transfer of ownership to be completed by calendar year end.
Q. What are liquidation costs?
A. Liquidation costs will depend on the type of security donated. For publicly traded securities, these costs are comparable to an institutional trade. For other types of assets, liquidation costs and appraisal fees could be higher.
Q. What are the costs associated with a CLASSIC fund?
A. Each Classic charitable gift fund account is allocated an annual administrative cost of up to 0.850% of the account’s assets to help offset the Foundation’s operating expenses. This cost is subject to reductions for accounts with assets above $100,000 as set out below. The cost allocated to a CGF is calculated only on the month-end value of the endowed assets, accrued monthly and collected periodically.
| Month-End Account Balance | Annual Cost |
|---|---|
| Up to $100,000 | 0.850 % |
| Up to $500,000 | 0.800 % |
| Up to $ 1,000,000 | 0.700 % |
| Up to $ 2,500,000 | 0.550 % |
| Over $ 5,000,000 | Contact Gift Funds Canada for information |
| Minimum monthly fee | $20.00 |
Costs are recovered directly from your charitable gift fund account.
Q. What are the costs associated with a FLEX fund?
A. Each Flex charitable gift fund account is allocated an annual administrative cost of up to 0.850% of the account’s assets to help offset the Foundation’s operating expenses. This cost is subject to reductions for accounts with assets above $100,000 as set out below. The cost allocated to a CGF is calculated only on the month-end value of the endowed assets, accrued monthly and collected periodically.
| Month-End Account Balance | Annual Cost |
|---|---|
| Up to $100,000 | 0.850 % |
| Up to $500,000 | 0.800 % |
| Up to $ 1,000,000 | 0.700 % |
| Up to $ 2,500,000 | 0.550 % |
| Over $ 5,000,000 | Contact Gift Funds Canada for information |
| Minimum monthly fee | $45.00 |
Costs are recovered directly from your charitable gift fund account.
Grants to Charities and Other Qualifying Donees
Q. What is the source of grant money in a CGF?
A. Grants will be disbursed from the spendable portion of assets, net investment income (namely interest and dividends) and gift capital in the Fund to the extent permitted by CRA regulations under the Donor's signed direction.
Q. How quickly are grants processed?
A. Grant requests are processed on demand and usually disbursed within two weeks of receipt of the request.
Q. How many grants can be made in a year?
A. There is no limit to the number of grants that can be disbursed from an account in a year, or to the number of charities receiving grants, as long as there are grantable amounts available to spend. However, a minimum grant amount of $250 applies.
Q. Is there a transaction fee charged on grants?
A. There are no transaction fees charged on grants made to charities in Canada.
Q. How will a donor's name be sent to the recipient charity or non-profit?
A. For each approved grant, the donor has the choice to be named or have the fund named on the grant that is sent to the recipient organization, or to remain anonymous. Grants can also be made in the name of another person. A grant letter from the Foundation will accompany the grant cheque sent to each recipient organization.
Q. Which charities and non-profit organizations can receive grants?
A. The Foundation will approve grants only to qualified donees, as defined and in good standing with the Canada Revenue Agency (CRA).
Q. Are there any limitations imposed on grants?
A. Yes. The Foundation will not approve grants to individuals, or political candidates or parties. It will not approve grants for any private benefit, such as annual dues, membership fees, benefit tickets, or goods purchased at a charity auction.
Q. Can donors name one or more charitable organizations as a beneficiary upon their death?
A. Yes, donors can name a qualified organization(s) to receive an annual grant funded from available grant money each year, upon the death of all the original donors.
Investment Options
Q. What investment options are approved for Foundation investments?
A. Donors may recommend the allocation of each of their CGF contributions (initial and additional) to be invested, through their financial advisor, into one of many predefined investment strategies described in the Charitable Gift Fund Agreement Form. Some of Canada's foremost investment firms provide the professionally managed funds that make up the various strategies.
Q. How are the investment management fees calculated?
A. The Foundation is using some of Canada's most respected investment firms. Funds entrusted to Gift Funds Canada are invested with these firms, and are subject to varying levels of operating, management and distribution expenses that are reflected in the daily net asset value (NAV). The management expense ratio (MER) will vary with the fund(s) selected.