Charitable Giving: Some Common Strategies

Malcolm Burrows, Head, Philanthropic Advisory Services, Scotia Private Client Group.

Charitable giving is a growing priority for many Canadians. We see this in the latest statistics: donations have increased by 136% between 1995 and 2006. This kind of support for charity is unprecedented in our history. While generosity and belief in community are primary motivators, the greatest enabler is a series of new tax incentives that began in 1996.

In introducing these incentives for charitable giving, the Federal government has given taxpayers a choice. It is a choice about how individuals wish to support society and the amount of tax they wish to pay. With these new incentives, it is now possible to eliminate the taxation on 75% of income except in the year of death and year prior to death, when this figure jumps to 100%. Everyone still has to make a contribution to society, but the decision about where the contribution goes is now up to the individual taxpayer.

Charitable donations can often be divided into broad categories. Here are some of the more common options available.

Cash Donations – The most straightforward gift, whereby the donor receives an income tax credit for that year.

Gifts of Public Securities – Gifts of appreciated public stocks, bonds, mutual fund units or shares to a public charity, or private foundation, are eligible for an extra tax incentive on top of the regular credit. The capital gains are eliminated, rather than the regular rate of 50% when sold.

Bequests – Leaving funds or property through a charitable bequest in a Will allows the donor to retain use of the property while living. The donor has the option to appoint a different charity if circumstances change. The donor’s estate receives the tax credit in the year of death.

Charitable Gift Annuities – This “life income” strategy combines a gift and an annuity that pays income to the donor. The charity receives an immediate gift and the donor gets partially tax-free payments from the annuity for life.

Gifts of Insurance – Life insurance can also be used to fund donations. Individuals can name a charity as a beneficiary on a life insurance policy. If the donor transfers policy ownership to the charity, he or she will receive tax credits during life for each premium payment. Alternatively, donors who retain ownership of the policy can create a tax credit for their estates at death.

Working with a team of experts from across the Scotiabank organization, The Butler / Laing Group can work with you to establish a charitable giving plan that is integrated into your financial or estate plan to ensure that all your goals and objectives are considered.  Contact us at (604) 535-4749, or use our contact page.

Malcolm D. Burrows is the national charitable gift-planning specialist with Scotia Private Client Group and ScotiaMcLeod. He spent 13 years working at major charities.

Integrating Charitable Giving into Your Financial and Estate Plan

Malcolm Burrows, Head, Philanthropic Advisory Services, Scotia Private Client Group

Charitable giving is a growing priority for many Canadians. We see this in recent statistics: donations have increased by 136% between 1995 and 2006. This kind of support for charity is unprecedented in our history. While generosity and belief in community are primary motivators, the greatest enabler is a series of new tax incentives that began in 1996.

In introducing these incentives for charitable giving, the Federal government has given taxpayers a choice. It is a choice about how individuals wish to support society and the amount of tax they wish to pay. With these new incentives, it is now possible to eliminate the taxation on 75% of income except in the year of death and year prior to death, when this figure jumps to 100%. Everyone still has to make a contribution to society, but the decision about where the contribution goes is now up to the individual taxpayer.

What makes these incentives distinct is that they all focus on gifts of assets – stocks, bonds, mutual funds, real estate, RRSPs/RRIFs, and business interests. These aren’t gifts we give often. They are exceptional gifts that stand out for their size and level of commitment. Frequently, these are gifts that are planned ahead of time and realized through estate plans.

While this sounds exciting in theory, a good financial and estate plan that includes charitable giving can be difficult to implement on its own. It is first essential to put personal and family needs at the centre of the planning process and then consider giving. Charitable gifts are irrevocable – once given, they are not returned. Also, it is sometimes hard to choose charities and commit large gifts.

Container Planning

The best way to integrate charitable giving into your financial and estate plan in a way that reflects both your values and your desire to minimize taxes is to use a “container”. By a container I mean an intermediary charitable entity – either a donor-advised fund at a community foundation or a private family foundation that can receive a variety of assets over a number of years. The container can be filled at your own pace, in increments or in one large installment. The container represents a piece of your legacy, an entity in your family’s name.

Typically, these assets are endowed, which means the capital is invested and only the income is spent annually. Both advised funds and true private foundations give ongoing control to the donors and their families to choose the charitable recipient annually.

Container planning separates the process of planning the gift from the support of individual charities. You can plan to give a large amount to charity over a number of years as part of an integrated plan. The contributions happen on your timetable and not when fundraisers come calling. Gifts to individual charities occur as part of a controlled, thoughtful process that preserves maximum flexibility.

Working with a team of experts from across the Scotiabank organization, The Butler / Laing Group can work with you to establish a charitable giving plan that is integrated into your financial or estate plan to ensure that all your goals and objectives are considered.  Contact us at (604) 535-4749, or use our contact page.

Malcolm D. Burrows is the national charitable gift-planning specialist with Scotia Private Client Group and ScotiaMcLeod. He spent 13 years working at major charities.