A Legacy Worth Considering: Giving While Living

When Chuck Feeney passed away in October, he was remembered as the ‘James Bond of Philanthropy.’ He pioneered the concept of ‘Giving While Living’ and was a personal hero to both Warren Buffett and Bill Gates.

Many have never heard of Chuck Feeney because he stayed humble and desired anonymity. Though he amassed over $8 billion in wealth by founding the airport retailer Duty-Free Shoppers, he lived a life of substantial frugality. He didn’t own a house, instead renting a small apartment, and reportedly wore a $10 Casio watch. He was known for flying in economy class, even when family members and colleagues travelled in business class on the same plane. He would spend 38 years awarding his entire $8 billion estate to non-profits around the world.

When estate planning, many of us focus on what happens after death. However, Feeney’s legacy may be worth considering: giving while living can play a complementary role. Giving to loved ones or charities while alive can provide benefits — the obvious personal one being the satisfaction of seeing your gift at work. Here are others, including financial ones:

Minimize an Overall Tax Bill — If you plan on gifting to adult children, there may be overall family tax benefits. If they are in a lower tax bracket, if investable assets are transferred, annual investment income may be taxed at their lower marginal tax rate instead of at your higher rate. Be aware that gifts to spouses or minors may result in negative tax consequences; income or capital gains from gifted property may be attributed back to you.

For charitable donations, you may receive greater tax benefits by making gifts annually and over time. This enables the use of the charitable donation credits to reduce your tax liability each year, as opposed to having a large donation credit at death which may not be fully used.

Simplify Your Estate — Gifting assets during your lifetime may reduce the size of your estate and thus the burden of managing assets by others later. This may help to reduce capital gains taxes at death, as well as probate/estate administration tax (where applicable).

Support Asset Distribution — If you wish to provide certain beneficiaries with a greater proportion of an estate, gifting while alive may potentially avoid a situation in which a issatisfied family member disputes your will.

Facilitate Legacy Planning — This may be a way to involve heirs in family legacy planning, providing an opportunity for open discussions about family values, charitable goals and wealth longevity. It may also be a way to coach adult children to become responsible stewards of wealth, allowing them to manage gifted funds, make decisions and see the outcomes.

Where to Start? There are many ways to give while living. Some choose to gift funds to family members to contribute to a TFSA, First-Home Savings Account or a Registered Education Savings Plan. For charitable causes, some establish family foundations or donor-advised funds. Keep in mind that, as with any gift, you will lose control of the funds. If you wish to maintain control, there may be alternatives, such as the use of a trust. For ideas, please get in touch.

*Given potential legal and tax implications, seek advice from specialists regarding your situation.