Lexi Clague was about 10 years old when she first witnessed the profound difference one person could make. In the wake of the 1956 Hungarian revolution, a wave of Hungarian immigrants began arriving in the United States, and her father immediately stepped in to help.
“He helped so many people, and I thought, these people were just totally lost and coming to a new country,” says Clague, now 80. “To have somebody who actually spoke the language spending time with them, helping them get settled – that impressed me.”
Inspired by her father’s example, Lexi and her husband, John, carried that spirit forward. When the Vietnam War ended and tens of thousands of Vietnamese refugees arrived in Canada, the couple welcomed three children who had been separated from their parents.
“They came to Canada in the dead of winter and knew virtually no English. That is something else,” recalls John, 79, with a chuckle. “You know, it shows you how people can overcome obstacles, but they needed help. And so that was something we felt was important, given the circumstances.”
Today, Lexi and John Clague set aside $100,000 every year to donate to a handful of local and international charities that support initiatives in British Columbia, where they live, and abroad.
One of those charities is ÀÖ²¥´«Ã½ Canada, which they have supported for more than 30 years.
How donor-advised funds simplify giving
Given the size of their annual giving and the number of charities they support, the Clagues’ accounting can get complicated. So when a trusted financial advisor suggested that they set up a donor-advised fund (DAF) to manage their philanthropic endeavors, they were game.
Although DAFs have been around for decades, traditionally used by community foundations, these funds have grown in popularity among donors in Canada who want an easy and impactful way to organize their charitable giving.
With a DAF, donors contribute assets like cash or securities to a fund, receive a tax receipt instantly, and then gift from the fund to the charity or charities of their choice over time. Think of it as a tax-advantageous bank account for your charitable giving. (Once contributions are made, they can only be used for charitable donations.)
DAFs are considered one of the best-kept secrets of the non-profit sector. Canadians contribute an estimated $3 billion each year to donor-advised funds, and it’s an area of giving that is .
Why are DAFs so popular?
Donor-advised funds are a no-brainer for both givers and charities, says Michael Todd, a philanthropic consultant and founder of .
“I talk a lot about smart and heart when it comes to donor-advised funds,” says . “You give from your heart; you don’t give for tax receipts. You give because you want to support a cause. But if you’re going to do that, then let’s do it sensibly and maximize your opportunities to give by doing it efficiently and effectively, so you can have more money at the end of the day to give away.”
Easy tax-planning tool
Todd says another big draw of giving through a DAF is that donors don’t need to make their donations to charities immediately. They can hold funds in the account until they’re ready while still benefiting from an instant tax credit for their gift.
For donors who give to multiple charities, giving through a DAF also keeps their charitable giving organized: Donors receive only one tax document- for the fund- instead of the multiple tax receipts they’d get if they were to give to each charity individually.
Flexibility is key
Donor-advised funds are also flexible. Donors can contribute cash or other financial securities such as stocks, bonds, and mutual funds. In some cases, a donation to a DAF can help alleviate capital gains tax.
“It’s an incredible tax-planning tool that you can use along your path of being a generous donor,” says Todd, noting that DAF donors often give twice as much as those who donate through traditional methods like credit cards or cheques.
There is also a higher donor retention rate among those who give through a donor-advised fund, with many donating year after year to the same charity.
Once a tool used mainly by high-net-worth donors, donor-advised funds can now be set up by anyone through their bank or investment advisor or through third-party platforms like or .
Non-profits like Plan Canada welcome and depend on donations through any method, including DAFs, because they help support the work we do every day to create a just world that advances children’s rights and equality for girls.
, recently senior manager of corporate and foundation philanthropy and donor-advised funds at Plan Canada, says the organization has received DAF donations ranging from $100 to $200,000.
“There’s been a shift in people’s philanthropic behaviour,” says James. “Rather than giving more on a reactive basis – like being asked and then giving – donors want more of a long-term plan for their giving, and to be more structured and strategic and give in a way that works for them and allows them to set up a legacy for their family at the same time.”
Seeing the impact live on
James has also seen parents set up a fund in their family’s name that their children eventually will take over to continue their charitable legacy. DAFs can also be used in wills and estate planning.
James adds that whether donors donate through a donor-advised fund or through more traditional methods, they should know they are making a difference.
“The number-one motivator for a lot of people in giving is that they want to see the impact. Our first opportunity to show them the impact is through a thank-you letter where we can show some of the key areas that their donation will support,” she says. “Donors want confirmation that their donation was received and that their money went to the intended purpose.”
For Lexi and John Clague, they have no doubt that their annual $10,000 donation to Plan Canada is making a difference. With Plan’s 85+ years of experience as one of the leading children’s charities worldwide and our proven experience working with partners all around the world, the Clagues know that their dollars are being used effectively and efficiently at Plan Canada.
“We should be here to do more than just advance ourselves. We should be helping others,” John says. “We know the world is unfair and there are gaps between the rich and the poor, and we feel it’s our duty, given that we have the ability and financial wherewithal, to help others.”
For more information about how to start giving through a donor-advised fund, visit our Individual, Family and Foundation Giving page.