For Lydia Potocnik, philanthropic planning is a career as well as a passion. Trained as an Estate Planning lawyer, she began her career working in philanthropy planning for a hospital foundation in Toronto. “That role really allowed me to appreciate the work being done by charitable organizations and the impact donors can have with their wealth,” she says.
Now, as Head of Estate Planning & Philanthropic Advisory Services with BMO, Lydia says more Canadian women are making plans for philanthropic giving than ever before. Statistically, women tend to be more strategic in their approach to giving, looking for ways to contribute time and money, maintaining meaningful relationships with charities they’re supporting, and using their philanthropy as an opportunity to be a role model for their families.
In order to account for personal financial needs and wants — both current and in the future — Lydia suggests that women take a more holistic approach to their wealth in order to ensure that their philanthropic goals are met. A good wealth plan, she says, will look at tax planning, wealth protection, estate planning, business succession planning, and philanthropy planning, and every aspect should consider a woman’s values, goals, and concerns.
To help simplify the process and make sense of philanthropic planning, we sat down with Lydia to discuss.
Where should a person begin when it comes to philanthropy?
The best place to start would be to get clear on your values and determine which causes and organizations best align with those. If you decide you want to have an impact with your giving, it’s a good idea to think about what that looks like to you.
Do you need to have a large amount of wealth in order to be a philanthropist?
No, you don’t need to have a significant amount of wealth to be a philanthropist. This is something you can build toward throughout your lifetime. However, it is important to note the difference between charitable giving and philanthropy. Charitable giving is often a one-time donation made in response to an immediate need, such as shelter or food or medical assistance. These contributions are often emotional or empathetic and provide short term relief — like donating to an emergency response fund. Charitable donors usually don’t enter into a long-term relationship with the organization.
Philanthropy, on the other hand, is a much more strategic — and personal — undertaking. Instead of focusing on short-term fixes, philanthropy aims to have a long-term, sustainable impact by identifying and addressing the root cause of systemic societal issues — everything from addiction and poverty, to racism and environmental causes.
What can someone do if they don’t have a significant amount of wealth but still want to begin their philanthropic journey?
There are several things they can do. Even without a significant amount of wealth, you can still make a difference with a charitable organization. I often tell individuals to reach out to the charity and find out what is important to them and what they’re trying to raise funds for. If you direct your giving toward a specific project, then you’ll be able to see the impact of your donation and that’s going to make it a lot more meaningful to you.
If someone is looking to become more philanthropic and has a larger amount of funds to allocate, what advice would you give them?
I would suggest they meet with a wealth advisor to determine how much they can afford to donate during their lifetime and combine this with their estate planning. By giving some money away while you are alive, you can experience the impact that you are having while also creating a legacy. An advisor can assist you with establishing goals and aligning them to your vision and values by taking a more strategic and long-term approach. They will often include the charitable organizations you want to support in these discussions.
Why is an advisor recommended?
An advisor will have experience helping individuals identify their goals and values and will also make educated recommendations as to how you can meet those goals. They’ll also consider your financial ability to make donations while alive and provide advice on the most tax efficient way to do so.
How important is planning and goal setting for younger women looking to begin their philanthropic journey?
For younger women, we typically recommend they divide their income into three pools: pay yourself (your savings), pay your expenses, and then give money to charity if you can afford to do so. We recommend a similar approach to children as they learn to navigate finances with their first allowance.
With women, it’s especially important to make sure that your own needs are met. We have found that with Millennials, there’s often a desire to get more involved when it comes to philanthropy. They often like to do things more publicly, get involved in broad-based fundraising initiatives, get their hands dirty, and get involved with the charity rather than just giving money. Boomers tend to be a bit more private and don’t always want to reveal who they are when they give money. Philanthropy looks very different to different demographics.
Regardless, the one thing that should remain the same is the plan. Having clear financial and giving goals will help you meet them without any added stress.
Are there any tools that can help women establish philanthropic practices earlier in their careers?
The Donor Advised Fund (DAF) tends to be ‘step one’ for a lot of women before they establish a foundation. The goal of this type of fund is to put in a minimum of $10,000 up front, which is earmarked for charity.
The whole amount is invested and every year, you decide how much you want to give to a chosen charity. You’ll get a tax receipt for the $10,000 when it’s invested. You can also choose to skip a year of donating if your focus is aggressive investment. When you’re no longer here, you can appoint someone else to take on the fund and continue to support the charities of your choice.