Does giving cost us? Absolutely – that’s why it is called giving. But there are some innovative donation strategies that may help to reduce your tax liabilities and enhance your capacity to give.
GIFTS OF SECURITIES
If you have marketable securities with accrued gains in your portfolio, consider donating them to a charity, especially if you intend to sell them on the open market in order to fund a donation.
Ordinarily, when you sell appreciated securities you are subject to tax on half of the realized capital gain. However, if the securities are disposed of by way of transfer to a public charity, you generally will not be taxed at all on the resulting capital gain.
In addition to avoiding the capital gains tax, you’ll also receive a donation receipt for the fair market value of the marketable securities.
Consider leaving a lasting legacy by planning for a future gift in your Will, through your RRSP, RRIF, or through a life insurance policy. Similar to your personal investments, taking time to plan your charitable giving will go a long way – for yourself and your favourite charities.
How Annie and John Added Over $600,000 to their Legacy Gift
Annie, a 40-year-old lawyer, and John, a 42-year-old emergency room nurse, added hundreds of thousands of dollars to their legacy gifts by making some minor changes to how they give.
Every year Annie and John donated approximately $5,000 to their favorite charity, receiving a charitable tax receipt for the full amount.
The couple decided to buy a joint life insurance policy, naming the charity as both owner and beneficiary. Each year, they pay a $5,000 insurance premium.
- Annie and John still receive a charitable receipt for $5,000 each year;
- The policy now has a benefit of over $600,000;
- When the funds are paid out to the charity, they will be tax- and probate-free.
THINGS TO REMEMBER
- You do not have to claim donations made this year on your current year’s tax return;
- Any donations not claimed in the current year may be carried forward over the next five taxation years;
- The Canada Revenue Agency generally allows spouses to combine their charitable donation receipts so the highest earner may claim all the receipts and the charitable donation credit can
be maximized within the family unit;
- Seek advice from a tax professional prior to implementing any strategy to ensure it’s right for you.
Monetary giving has its merits, but so does giving your time, food or clothing to shelters in the city. Let’s all think about new ways of giving this holiday season.
For more about gifts of securities or legacy gifts, please contact St. Paul’s Foundation at 604-806-8271 or visit helpstpauls.com/legacy-giving.
Securities and investment information provided by Ludovic Siouffi, MBC, CIM, Investment & Insurance Advisor at Canaccord Genuity Wealth Management.