Last week the third largest charitable gift in Canadian History was disclosed.  The gift for The Calgary Foundation (the news release: http://thecalgaryfoundation.org/news-events/in-the-media) is from Mr. Daryl K. Seaman.  The amount is for $117 million.  Initially Mr. Seaman had created a private charitable foundation but in 1995 he closed it and moved his charitable giving to the Calgary-based public foundation.

I was curious to see how many public and private foundations currently existed in Canada.  This information is available on Canada Revenue Agency’s web site.  I was surprised that the numbers were so close in size.  The site indicated 5,140 public foundations and 5,264 private foundations.  You can do your own search here:  http://www.cra-arc.gc.ca/ebci/haip/srch/advancedsearch-eng.action .

Both types of foundations accept a variety of donation instruments such as stocks, businesses and real estate.  Unlike regular charitable donations, the granting to a charity can take place after the donation is made.  This means that funds can build up in the foundation and donation decisions can be deferred until a suitable need is identified.  The tax deduction occurs in the same tax year as the donation to the foundation.

It’s interesting to compare the two types of foundations.  The differences come down to a few main points:  administration, economies of scale, full control and privacy.  However, these points are key in deciding whether to go with a public or private foundation.  Public foundations will have the responsibility for all the tax paper work and for dispersing the funds appropriately as well as monitoring their use.  Private foundations let you direct your funds to those causes most important to you.  Public foundations will disperse funds according to their current mandate or to meet some urgent needs that unexpectedly arise.  The investing of the funds through public foundations will typically result in lower investment fees due to economies of scale.  However, the downside is that investments may be made in instruments that do not match your investment philosophy.  Public foundations are likely to be careful about investing in something that is wildly controversial but you will have no control over their decision regardless of your point of view.  The investment approach will be one of the main deciding factors when selecting a public foundation.  Finally, protecting the privacy of your private foundation is more difficult since some charitable information will be available although personal information such as the names of directors are not published.

Private foundations can last through many generations.  However, they may not support the original intentions once they pass to the next generation.  Your children may find the private foundation time consuming to manage and they may also see other needs as priorities for charitable giving.  Mr. Seaman is quoted as indicating that he chose a public foundation because he did not want to be giving from the grave.  This philosophy is worth considering because unexpected social changes may result in unforeseen needs and many public foundations are more agile to meet these needs.   In the end, either decision is a good one when foundation funds are dispersed to meet the needs of vulnerable groups or special causes.