"Giving" Advice | Spring 2015

Giving Beyond Capacity.
Written by: Barry S. Corbin, Corbin Estates Law

We pass on our value systems to family members by our words and our deeds. However, as in most things, when it comes to philanthropy actions speak louder than words.

If your values include ongoing support for your Jewish community and for Israel, by what actions might you communicate the importance of those values to family members? There are many possibilities. You might be making an annual gift to the United Jewish Appeal Annual Campaign. With adequate financial resources to do so, you might have established a perpetual Annual Campaign Endowment Fund (PACE) at the Jewish Foundation of Greater Toronto, so as to ensure that there will be no lapse in that support going forward. Or you may have decided on a planned gift -- and there are a number of varieties -- to ensure your philanthropic goals will be met when you are no longer there.

However, what if you are there, but "not there"? That is to say, what if (through accident, illness or progressive disease) you are no longer mentally capable of managing your financial affairs? Planning for such a scenario is normally handled by putting in place on a timely basis a continuing power of attorney. (Terminology: the person giving that authority is the "grantor"; the person to whom that authority is given is the "attorney".)

How can you, as the grantor, ensure that your attorney will continue your philanthropic practices when you are no longer capable of doing so yourself? Ontario's governing statute, the Substitute Decisions Act, 1992 (SDA) mandates certain expenditures by an attorney:

Expenditures that are reasonably necessary for the person's support, education and care;
Expenditures that are reasonably necessary for the support, education and care of the person's dependants; and
Expenditures that are necessary to satisfy the person's other legal obligations.

What about charitable gifts? They don't fall under any of these categories (unless the grantor had, prior to becoming incapable, entered into a legally enforceable contract to make such a gift). Happily, the SDA allows the attorney to make "optional expenditures", one of the two categories of such expenditures being charitable gifts.

Charitable gifts may also be made by the attorney where the continuing power of attorney itself authorizes the attorney to make such gifts. What if the continuing power of attorney is silent in that regard? In this case, the attorney may still make those charitable gifts if the grantor had made "similar expenditures" at a time when he or she was capable of managing his or her property. Thus, a grantor who regularly makes charitable gifts would be able to take comfort from the knowledge that his or her attorney would have the authority to continue such a gifting practice even if the continuing power of attorney contained no express authorization to do so. (It is unclear whether the requirement of prior "similar expenditures" by the grantor would open the door for the attorney to make charitable gifts to a different charity.)

The SDA imposes a ceiling on the quantum, either by amount or value, of charitable gifts that an attorney can make in any given year: namely, "20% of the income of the property in the year in which the gifts are made". Consider the following example. A now incapable grantor had been donating $10,000 a year to the UJA Annual Campaign for many years. The attorney who wishes to continue to make annual contributions at that level on the grantor's behalf will not be able to do so in any year where the income derived from the grantor's property over which the attorney has control is less than $50,000. In the event of such an income shortfall in a year, the attorney who wished to make the $10,000 gift in that year would have to apply to a court for an order permitting the usual donation to be made.

Remember that the making of charitable gifts by an attorney on behalf of an incapable grantor falls under the category of "optional expenditures". If the grantor has any concerns as to whether the attorney will in fact continue the grantor's past philanthropic practice, what can be done? The answer is simple. The grantor need only ensure that the continuing power of attorney contain specific instructions to the attorney that such charitable gifts be made. In that case, the statute states that "the instructions shall be followed". Thus, the intended charitable gifts would no longer be optional but mandatory and the grantor could be assured that his or her philanthropic goals would continue to be met during his or her period of incapacity. (There are two caveats on the mandatory nature of the instructions. First, the attorney may not make those charitable gifts if they would adversely affect the ability of the attorney to make the mandatory expenditures referred to above. Second, the previously-mentioned income threshold to support the quantum of the charitable gift in each year must be met.)

If you wish to ensure that your philanthropic objectives will be met if you become mentally incapable, see that your continuing power of attorney contains the requisite instructions to your attorney to continue to make your desired charitable gifts. Indeed, you might wish to go further and advise the intended charity that your continuing power of attorney contains such instructions. Armed with that information, the charity will be in a position to monitor the attorney's actions to see that your philanthropic wishes are carried out.

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