As co-founder and Principal at Stewart and Kett Financial Advisors Inc., Cynthia Kett has more than 30 years of experience advising families on retirement, estates, and philanthropy, including tax planning. And now a member of the SickKids Professional Advisors Council, she is an endowments expert. She also follows her own advice. In 2007, Cynthia created the Kett Family Donor Advised Fund, which is split between SickKids and four other charities.
We asked her to explain everything endowment-related, just as she would to a client.
HOW DO ENDOWMENTS WORK?
An endowment is a perpetual gift. If someone wishes to make a significant gift, either as a lump sum or over time, the capital remains invested, and the annual income from that capital is used to benefit SickKids. So, it’s for people who want to see their charitable gifts provide benefits over the long-term, potentially through generations.
THERE ARE SO MANY WAYS TO GIVE TO SICKKIDS. WHAT’S THE ADVANTAGE OF AN ENDOWMENT?
An endowment allows you to give back, but it also allows you to involve your family and future generations in charitable decision-making.
HOW ARE ENDOWMENTS GOOD FOR THE HOSPITAL?
It’s wonderful when SickKids receives a large, one-time gift. The Hospital can put the funds to good use immediately—particularly if there’s a need for building or equipment acquisitions. But with endowments, SickKids can count on a certain amount of money every year. So, it helps with cash flow planning.
HOW DOES A DONOR ADVISED FUND DIFFER FROM A TRADITIONAL ENDOWMENT?
With traditional endowments, you contribute your capital, and the annual income from that capital benefits SickKids and only SickKids. With a donor-advised fund, the annual income from that capital can be split between SickKids and other charities.
Donor advised funds almost allow you to create a mini private foundation. SickKids does all the administration and investing, and you advise them which other charities you’d like to benefit.
WHEN’S THE RIGHT TIME TO START AN ENDOWMENT?
We’re seeing more people donating during their lifetime rather than waiting until they pass away. I think people should seriously consider doing so. With financial planning, you can determine how much you can afford to give now, without compromising your family’s financial security. There can be immense satisfaction in making endowment gifts during your lifetime. You can have important family conversations about charitable giving; you can see your money at work; and you can find joy in the act of giving—and the joy it brings to others.