Reducing taxes with Planned Giving
Canadians
have always been generous in donating their time and money
to charitable organizations. But in recent years, they’ve
had to be even more generous. Because governments have cut
back on direct funding to charitable groups, the responsibility
has fallen on corporations and individuals to fill the gap.
Fortunately, a number of tax incentives have been introduced
by governments to encourage more private giving. With these
legislative changes, the structure of charitable giving can
be just as important as the amount that is given, both to
the charity and to the client.
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"Above all things, have fervent
charity among yourselves,
For charity shall cover a multitude of sins"
I Peter, 4:8 |
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Charitable giving is a unique opportunity
There are not all that many opportunities in life to ‘have
your cake and eat it too’. Planned or charitable giving
is one of them.
A planned or charitable gift is defined as a gift to a charitable
organization made in such a way that you’re able to
maximize any tax and estate planning advantages.
Your gift can take many forms and be made in a variety of
ways
Planned gifts can take many forms including cash, publicly
traded stocks, bonds, stock options, mutual funds, cultural
and art objects, real estate and life insurance proceeds.
In addition to gifts made prior to death, some of the ways
in which gifts can be made are:
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Bequests under a will – There are many options
for creating a bequest in your will, each with advantages
and disadvantages. You should seek the advice of an expert
to find out which might be best for you.
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Life insurance - You can put a life insurance policy
in place that will pay a specified sum to the chosen charity
by naming it the beneficiary of the proceeds. You can
then claim the annual cost of the insurance policy as
a charitable donation, even though the money is bequeathed
only upon your death. Or you can name your estate as your
beneficiary and include the charity in your will. In this
way the tax advantage is for your estate.
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Gifts of RSP or RIF assets
-
Charitable gift annuities – This allows you to
give a lump sum to a charity and receive periodic income
in return. This arrangement is most beneficial for those
aged 70 or over.
-
Charitable remainder trusts – This is essentially
a living trust you establish by contributing your assets
and which pays you an income while you’re alive.
Upon your death the remainder of the trust will pass directly
to the charity you have named. The advantage is that you
can enjoy tax advantages while alive, compared to a bequest
which only benefits your estate.
Please note: This section
on planned giving has been included in the Estate Planning
section because so many charitable gifts are based on a transfer
of assets upon death of the donor.
One reason for this is the fact that in the year of death
and the previous year, 100% of the donation can be deducted
from the net income of the estate.
However, you should be aware that planned giving while you’re
alive can also provide you with significant tax advantages,
up to a maximum of 75% of net income per year.
In both cases, whether as part of your estate plan, or as
part of your financial and tax planning, it is strongly recommended
that you seek guidance from independent experts to ensure
that all your financial goals and your wishes for the charitable
organization are met. One person who can help you is an RBC
Financial Planning professional.
Important information about our financial planning services can be found at the bottom of our
homepage.
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