Strangers in Family Foundations
Family charitable foundations are often equally about the family working together as they are about charity. While the purpose of a foundation must be exclusively charitable, the founders’ hope is that future generations of family will have a place to work together and act on their values. But how, particularly in an estate plan, do founders keep a family foundation on course? One strategy is an independent director or trustee.
Protecting Charitable Interests
Are charities in a will easier to challenge when there are more than five entities named? This topic came up at a recent lunch with estate planning and litigation colleagues. One told a cautionary tale of a large estate that was litigated away from a dozen named charities. The charities lacked the will and coordination to uphold the testator’s clear charitable intent.
Should Foundations Give More?
Charitable foundations are grappling with their response to COVID-19. A Canadian initiative, Give5.ca, is advocating for increased granting through a time limited pledge in 2020. Simply, the ask is for foundations to pledge to grant at least of five percent of their assets to registered charities in 2020.
When Charities Die
Contrary to public perception, it is quite common for charities to die. The majority of charities are small, volunteer-run entities and some run out of steam and are deregistered. Since 2011, over 7,536 charities have had their status revoked by Canada Revenue Agency for reasons ranging from exhaustion and mergers (which produce voluntary revocations), failure to file the annual return, or cause. What happens when there is a gift by will to one of these deregistered entities?
Private Foundation Continuity
The combination of “private foundation and perpetuity” is a bit like “Fred and Ginger”, always linked in the public mind. Since 2000, however, the charitable status of 1,750 Canadian private foundations has been revoked. Of that number, 1,088 private foundations deregistered on a voluntary basis at the request of trustees or directors.
Serving the Charitable Purpose
I want to float a trial balloon about charitable trusts. A clause stipulating that a trust should be limited to using income for charitable purposes, meaning that capital is untouchable, should be viewed as an administrative clause and not part of the charitable objects. The charitable purposes of the trust may be perpetual, but making the trust “income only” is a historical drafting convention that no longer serves the charitable purposes. “Income only” is a scheme that is a means to an end (i.e. the charitable purpose) that is no longer serving the end.
Parallel Foundations
Almost every Canadian hospital has a “parallel” public foundation. These entities are registered charities that raise money on behalf of the hospital and hold investments, especially perpetual endowments. While parallel foundations may have started at hospitals, they are now a fixture of the charitable landscape. There are foundations for international charities, universities and schools, art galleries and museums, social service agencies, professional associations, and religious organizations. They have become so common that few people know why they exist. There is just this vague sense that a “foundation” is the necessary pre-condition for successful fundraising.
A Case of Mission Drift
The WE Charity’s story should be a business school case study. Young, idealistic founders. Growth and acclaim. Complexity, political scandal, and collapse.
But is WE Charity a case that can teach charities and donors, or is it an outlier?
Letter From the Editors: Good Public Policy in Canada
Recent writing in The Philanthropist has focused on the role and limits of the charitable sector in the furtherance of good public policy in Canada. These discussions have used “policy advocacy” as an omnibus term to identify this issue. Although policy advocacy might include some initiatives that the Canada Revenue Agency (CRA) would define as “political activity,” policy advocacy can consist entirely of activities that CRA would deem to be “charitable.”