On Our Own…Together

Trust Funds for Families with Financially Dependent Loved Ones and Endowment Funds for Small Not-for-Profit and Charitable Organizations


Harry van Bommel


Resources Supporting Family and Community Legacies Inc., Scarborough, Ontario


© 2002 by Harry van Bommel

© 2002 Cover cross stitch by Janet Klees.

© 2002 Cover design by Jonathan Vinden and Beverley Powell-Vinden


ALL RIGHTS RESERVED. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of the author.


This book is also available for free reading and printing from our web site at: www.legacies.ca



Canadian Cataloguing in Publication Data


van Bommel, Harry

On our own…together:

trusts funds for families with financially dependent loved ones
and endowment funds for small not-for-profit and charitable organizations/Harry van Bommel

Includes index.

ISBN 1-55307-005-4

1. Trust and trustees-Canada. 2. Endowments-Canada.

I. Resources Supporting Family and Community Legacies Inc.

II. Title.


KE787.V35 2002346.7105’9C2002-901664-9


To contact the author, write or call:


Resources Supporting Family and Community Legacies Inc.

11 Miniot Circle

Scarborough, Ontario

M1K 2K1

CANADA

(416) 264-4665

www.legacies.ca

E-mail: harry@legacies.ca


Printed and bound in Canada by Webcom Limited.

In memory of our godson, Daniel McGregor, who taught us so much about love, compassion, excitement, joy and acceptance.


In honour of the people who constantly struggle to convince others that everyone, including people with disabilities, need the same basic human supports of: love, food, shelter, friendships, education, work, and most importantly an acceptance of their gifts and love. In testament to those small not-for-profit and charitable groups who are making a real difference in the lives of their communities but who are forced to waste their time and skills on raising operational funds.


Dedicated to Janet, Bram and Joanna who define family and home for me every day as they share in, and support, our work


What You Must Know First

This book is about methods to secure some financial comfort, or even independence, for (a) your financially dependent loved one or (b) your not-for-profit/charitable organization.

This book is an information guide -- not an instruction manual. The book does not, nor is it intended to offer legal, tax and financial advice. Use it to ask the appropriately qualified people the right questions that fit your specific situation.

This book is really two books in one. Why does the book combine trusts and endowments together? Why put families with a dependent loved one together with not-for-profit or charitable organizations?

The answer is their common ground. Although families with dependent loved ones and not-for-profit and charitable organizations have different operational needs and, obviously, different finances, both are involved in trying to secure some financial independence in the future. Both are looking for ways to avoid the monthly and annual contortions of making ends meet. Both have traditionally avoided long-term financial thinking because daily demands are too great. Both have exhaustion (physical and mental) as common denominators of trying to balance current needs with all the struggles and fears of long-term financial comfort. By giving common financial and legal information to both audiences, we hope to satisfy a common need with enough flexibility to meet your requirements.

Also, for a growing number of families, future security is based, in large part, upon their membership in a family group. Such groups usually consist of a limited number of families (less than 15) that have joined together in a common vision for emotional and physical support. Some of these groups have become incorporated and have turned their attention to securing future financial support for its membership. The trust fund information may help the individual families of such a group. The endowment information may help the whole group look at securing future support dollars.

Do your homework to save you, and the people who must follow your directions, as much frustration and time as possible. Spend at least as much time planning, deciding and moving ahead with a trust or endowment fund as you would in selecting a new car or career or in buying a new home. The consequences for your loved one or organization can be life affirming or devastating.

Information, statutes, federal and provincial budgets, legal precedents and investment strategies change quickly and often. Remember to talk to professionals with special expertise in trusts and endowments including: a qualified financial and estate planner, a lawyer, a tax consultant and/or similar professionals before signing any documents. You would not buy a house without a lawyer, so get the expert help you need to ensure the future of your child/children or organization. It is worth the peace of mind.

Examples are provided for illustration only -- their accuracy cannot be guaranteed. Resources Supporting Family and Community Legacies Inc., its employees and agents assume no responsibility for errors or omissions or for damages arising from the use of the published information and suggestions. You must consult with your own professional advisors to decide what is best for your own financial and legal circumstances.

Language and Jargon

A book with financial and legal information always has ‘jargon’. The jargon is important to understand if you want to ensure that you and your financial and legal advisors are speaking about the same things. It is just the same as when you learn the jargon when buying a home (e.g., mortgage, deed, conditional sale) or when getting medical help (e.g., oncologist, hypertension, cholesterol). Get a basic understanding from the text and glossary and then get your advisors to help you truly understand the terms and their importance in your specific situation. They learned what the words mean in basic English so they can certainly help you understand them too.

The word disability is used throughout the book to refer to people who have a developmental and/or physical condition or impairment that limits them performing one or more life functions in a significant way.

Family refers to someone’s own biological family as well as to their close friends whom the person includes within their family.

Dependent loved one refers to a person of any age who is somewhat or completely financially dependent on another person, e.g., your child (young or older) with or without disabilities, or a dependent adult (parent, relative or friend).

Small not-for-profit and charitable organizations are those that have operational budgets under $1,000,000 (most of them under $250,000). Not-for-profit organizations are not charities and can, therefore, not provide an Income Tax Receipt for donations. Both not-for-profit and charitable organizations, however, are governed by a Board of Directors that oversees the organization’s mission of providing not-for-profit services, information and assistance. The difference between these two types of organizations is presently under review in Canada.

An endowment fund is a separate fund of money and/or assets that must be kept for at least 10 years. The interest from the money and assets may be dispersed (a minimum of 4.5% per year) but the principal cannot be touched. Endowment funds can hold money, stocks, mutual funds and bonds, property, and other physical assets. They are usually created to help pay for a specific program or service or to donate to another charitable organization (e.g., a separately incorporated hospital foundation creates and maintains an endowment fund to pay for specific programs in the hospital).

A trust fund is a method of contributing assets from one person to another with a person in the middle to ensure the money is well spent. One person transfers ownership and control of their contributed assets to a middle person, the trustee, to be held in trust for the benefit of a third person or group of people. The trustee must legally manage the trust in the best interests of the beneficiaries under whatever written instructions given to them by the creators of the trust.


How To Use This Book

Parts 1 and 4 of both the book and the Appendices have common information for families with financially dependent loved ones and for not-for-profit and charitable organizations. Pick out that information that is most relevant to your specific situation. Part 2 of both the content and appendices are just for families and Part 3 for organizations.


Acknowledging the Sponsors

We are truly grateful to Deohaeko Support Network for securing a grant from the Trillium Foundation of Ontario to provide funding for the research and writing of this book. Deohaeko’s commitment to providing information and sharing their own learning with families, not-for-profits and charities is admirable. They practice what they preach with commitment, enthusiasm and good humour. They are a role model to us all.

This book is also available to anyone for free reading and printing from our web site at: www.legacies.ca as well as another book on Deohaeko, We Come Bearing Gifts by Janet Klees.


Disclaimer: The views expressed in this book are those of the author and not necessarily those of the sponsors.


Acknowledgements

Deb Thivierge has provided fundamental information, advice and encouragement for this book. Her research and editing skills and her understanding of the fields of both disability and not-for-profit are formidable. I am grateful for her many contributions. This book would not have been possible without her.

I am grateful to the following people and organizations:

ACT (AIDS Committee of Toronto) and Greg Lichti, their senior development officer, for help in understanding aspects of creating an endowment fund with a community foundation. ACT has kindly given us permission to reproduce their agreement with the Toronto Community Foundation as a sample of what a similar agreement may look like for your organization.

Canadian FundRaiser for permission to reproduce part of Jim Hilbourne’s article, November 4, 1998 on sample bequest wordings.

Deohaeko family members have provided unending encouragement and support throughout this project. They continue to inspire me with their visionary approaches, their energy and their commitment to providing other families with the same useful information they have collected for themselves. The following members have gone through the book and provided thoughtful feedback for which I am very grateful: Mary and Clive Bennett, Linda Dawe, Helen Dionne, and Harriet Salmers.

Orville Endicott, LLB presented basic starting information to a group of parents on trust funds that was very helpful. His subsequent review of the manuscript helped make the information current and accurate.

Sandra E. Foster gave her kind permission to reproduce two pages from her 1996 edition of You Can’t Take It With You: The Common-Sense Guide to Estate Planning For Canadians and made useful suggestions during an interview.

Janet Georgieff is the Executive Director of the Community Foundation of Durham Region and she corrected an error in the section on community foundations.

Alvin Isenberg, M.A. LL.B. gave a thorough review of the material and his extensive, practical revisions have made the material much more useful to the readers.

Jayne Kirby Donahue, LL.B. assisted with information and encouragement early on in this project to give some perspective on trust and endowment funds.

Ronald Hawkshaw, LL.B. is Chairman of the Community Foundation of Durham Region and provided feedback on the manuscript that was very helpful.

The Heart and Stroke Foundation of Ontario generously permitted us to reprint five examples from their planned giving materials to help illustrate key donation methods.

Colleen Man is a financial advisor whose material helped me grasp the basics of trust and endowment funds. Her encouragement continues to provide support.

James Marshall of TD Canada Trust for leading me to legal expertise in the field.

Judith McGill did an extensive review of the content from the perspective of a consultant working with families with financially dependent loved ones as well as a journal editor. Her eye for detail has enriched this book.

Margaret E. Rintoul, LL.B. kindly provided up-to-date detailed legal and tax revisions to help make the book as practical as possible. Her background and expertise in this field were most welcome.

We gratefully acknowledge the Royal Bank of Canada for permission to reproduce their chart A Personal and Estate Planning Considerations in Charitable Giving in our chapter on planned giving.

Lorna Somers generously gave us permission to reproduce the “Sample Endowment Fund Policies” and “Sample Endowment Fund Agreement” from her book Planned Giving for Canadians.

Graeme Treeby and Rodney Dunn of the “Special Needs” Planning Group generously permitted us to reproduce their material on discretionary trusts, trustee responsibilities and their life planning format which they use with their clients. These are reproduced in the appendices.

Carol Oliver and Robert Peacock of the Toronto Community Foundation shared information and led us to further sources.


My sincerest thanks and love to Janet Klees who models the spirit of this book in every way and who is the primary editor of all of my work. Her suggestions through two revisions of the book have made the final result more readable and useful. She is my inspiration and role model along with our children Joanna and Bram.

Introduction

Note: This is a short book as you will probably need to read only the half (about 70 pages) that applies to your situation (i.e., as a family member or as an organization). Therefore, we cannot cover every kind of financial situation that relates to your needs. Adapt the information in this book to meet your needs and use it as a guide to ask the right professionals the proper questions. There is a lot of specific information out there and professionals and organizations can help you understand the tools and financial instruments you will need to use for your specific circumstances. Look in the recommended resource list at the end of this book and your local library and bookstore for further information.

Sometimes in our quest to know everything about something that is important to us, we get stuck in wanting to read just one last book, visit one more friend who has experience, or attend one more conference or seminar. This is especially true around making financial decisions or writing out our wills. In fact, because we do not want to make a mistake, we often do not make any decisions or we procrastinate in hopes that we won’t have to worry about it. Sometimes we procrastinate with the unconscious belief that if we don’t write a will, we won’t die or if we don’t secure the financial future of our dependent child or our organization, someone else will.


This book, then, is about encouraging you to arrange some financial security for your dependent loved one or your not-for-profit/charitable organization.

You, as a family member, must make the legal decisions involved in securing financial comfort or independence for your dependent loved one. If you represent a not-for-profit organization or charity, it is the organization that must make the final decisions about establishing an endowment fund. You are on your own, in that sense.

However, we are together in trying to make sense of all the financial and legal options out there. We also want to act on this information to secure the futures of our loved ones and our not-for-profit organizations.  None of us has to go it alone.

You also have the resources of financial planners, accountants, lawyers and others who can help you make the best decisions possible at the time. This book will provide you with an overview and many of the questions you need to ask to get the best results for your dependent loved one or organization. You will not make perfect decisions no matter how hard you try. We cannot predict the future and, therefore, we can only make the best decisions possible given the information and financial/legal circumstances of today. That you are in the process of doing anything at all sets you apart from most families and organizations today.


It is important that you design and act on a thoughtful plan of action during the next 12 months so that you will have some peace of mind for the financial future of your dependent loved one or your not-for-profit or charitable organization. You will continue to review and revise your plans over the coming years but only if you make the all-important decision during the next 12 months to set up your trust or endowment fund.


Sincere Best Wishes,


HARRY VAN BOMMEL

Scarborough, Ontario

On Our Own...Together


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Copyright © 2002 Harry van Bommel

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical copying, recording or otherwise, except with the prior written permission of the author or under license from the Canadian Copyright Agency.