Due North: Canada And Legacy Giving

When Variety — The Children’s Charity of British Columbia hired Peter Chipman to be its director of planned giving and major gifts in 2001, its legacy giving program raised about $200,000 (Can) annually and was staffed by volunteers. Chipman switched the program to paid staff, and it now generates roughly $1 million (Can) annually for the Burnaby, British Columbia charity.

“This stuff does not happen by magic,” said Chipman. “It’s grunt work.” Canadians seem to be putting in the work. According to the 2010 “Canada Survey of Giving, Volunteering and Participating,” approximately 740,000 Canadians age 15 and older included a bequest in their wills. That’s approximately 3 percent of the total population age 15 and older.

“There has been long-term systemic work of making Canadians more aware (of bequest opportunities),” said Michael Johnston, founder and president of the Toronto, Ontario firm Hewitt & Johnston Consultants (hjc). “There are enough programs in enough provinces. Organizations are being more proactive internally, using different channels and more communication to their donor base.”

While that might be correct, the number of Canadians donating via a will was down in 2010 as compared to 2007, when an estimated 840,000 Canadians made a bequest. It is a similar situation in the United States: Americans donated $22.83 billion in bequests in 2010, up 18 percent from 2009, but down from $23.15 billion, or 7.6 percent of all donations, in 2007.

The United States and Canada is very similar when it comes to donors, said Johnston. “In both countries, the same British common law principles hold true. If you don’t write (a will), the government is going to grab a bunch of (your estate).”

Contrast that with the Napoleonic Code of law principles, utilized by much of Europe including France, Italy, Spain and Portugal. “Families are given a percentage of an estate by law,” said Johnston. “Therefore, it decreases the percentage of wills.”

A 2010 poll by Good Works, based in Ottawa, Ontario, found that 53 percent of Canadians have wills. Only about 35 percent of Americans have wills, according to a December 2009 survey administered by Harris Interactive, a New York City research and polling firm. Of those Americans without wills, 44 percent reported they do not have a will because they’re more focused on day-to-day essentials.

Johnston said another difference between legacy giving in the two countries is the larger average bequest in the United States. The average bequest size in the United States is about $32,000, according to nonprofit watchdog organization Guidestar, with headquarters in Williamsburg, Va. According to a 2011 Blackbaud study, it is between $35,000 and $70,000. The same Blackbaud report showed the average bequest size in Canada is $30,000.

Johnston said that, although Canada’s economy did not decline as sharply as the United States’, “(Canadians) devour U.S. media in large amounts and can’t help but watch the news,” and therefore more cautious with their money when the U.S. economy is struggling.

That could be good news for planned gift officers, said Diane MacDonald, executive director of the Canadian Association of Gift Planners (CAGP), an association in Ottawa, Ontario with about approximately 1,350 members. A bequest is essentially a promise of future donation, with no immediate monetary commitment. “Having conversations with donors about their money after death…might be a good conversation to have today even when donors are not inclined to give as much,” said MacDonald.

Tanya Howe Johnson, president and CEO of the Partnership for Philanthropic Planning (PPP) in Indianapolis, Ind., agreed regarding timing. Despite a challenging economic climate compelling nonprofits to focus more on short-term fundraising, “there needs to be value within the organization placed on long-term viability, looking forward to the future,” she said. “We have organizations struggling to put resources into long-term development, but we also have donors who are wanting more options for how to support organizations and increase giving during hard times.”

Johnston believes that the average Canadian bequest will increase due to a stronger Canadian housing market: “(There has been) no decline in housing pricing or a banking crisis in Canada,” he said. “As our net value per capita has gone up, it might mean estate values being higher and coming closer to the U.S.A.”

The lack of estate tax in Canada might also influence legacy gifts. When a U.S. citizen dies and lists beneficiaries in a will, the government takes a percentage of the decedent’s total assets, known as the gross estate, over a certain amount. Legacy gifts can reduce the gross estate, which can potentially bring it under the exemption amount. The estate tax was repealed for people dying in 2010, but reinstated in 2011. For 2013, the exemption is expected to be $1 million; anything more than that will be taxed at 55 percent. In contrast, Canada abolished its estate tax in 1972.