Planned Giving

Saskatoon Community Clinic Planned Giving –Strategies To Help Maximize Your Charitable Donations.

By Robert F. Collins, CFP, CPCA

There are many things in life that are a mystery to me. Why is the sky blue? What exactly is it that makes northern lights? Why are mosquitoes more interested in me than my spouse?  Some of these questions can be difficult to answer. This article will address a different question, one that I believe is much more important: How can I ensure that my favorite charities and organizations remain financially viable? The answer is through our support with Planned Giving.

Q.  How does Planned Giving work, and how many different ways can I make a planned gift?

A. Traditionally people have donated by giving cash or writing a cheque. This is a simple and straightforward option. The charity would have use of those proceeds immediately. It can however be difficult for many of us to make a sizeable donation with this method. We will explore the “meat and potatoes” of several other gifting strategies that can help you make larger and more substantial gifts. These strategies will focus on maximizing the benefits for both you and your favorite charities/organizations.

Q. What are the tax advantages to gifting?

A. There are a few common features between the many gifting options. First, all donations are tax deductible (up to 75% of your income). Second, gifts can be done while alive or upon death. Third, regardless of the size of your donation, your gifts are always needed and appreciated. All donations will receive a non-refundable tax credit issued by the charity. These tax credits allow for a 15% federal tax break on the first $200 donated or 29% if it exceeds $200. When you combine this with your provincial tax rate, the savings can be significant. These tax credits can be used now, in later years, upon death, or be shared with a spouse who may be in a higher tax bracket.

Q.  What are some alternative ways I can give?

A.  One of the simplest ways for you to make a significant donation is to donate through your Will upon death. Not only is the timing convenient, but also there is generally large tax consequences triggered upon death. The tax credits from gifting would be very useful. Here are a couple of ideas for gifting upon death:
1. Gifting RRSP’s or RRIF’s: These are taxable assets upon death and could create a large tax issue for your estate. If you were to name a Charity as beneficiary, the assets could go directly to the Charity and create a tax credit for your estate to use – hopefully putting your estate in a position where there is little or no tax payable.

2. Gifting property: There are no tax implications upon death in regards to your principle residence, but secondary properties such as a cabin or rental property may have taxable capital gains outstanding. The charity would receive the property and issue a tax credit receipt for the total value of the property given. Again, the tax credits could be used to offset the tax challenges that arise upon death.

Q.  What if I still need my asset today?

A.  If you are planning a sizeable gift and you want to maintain some control over the assets, need the income it generates, or wish to retain the use of those assets, then you may want to consider gifting through a Trust. A Trust will allow you to specify when and how assets can be used. You can make the gift prior to death, get an immediate tax credit, and retain a “life interest” in the asset until death.

If you are considering a trust you should have a meeting with your charity in order to see what their needs are. This way, you can be sure that the trust is set up in a manner that truly benefits both yourself and the charity.

Q.  I have stocks. Can I donate those?

A.  Definitely.  You may want to give those stocks “in kind”, or as they are. When stocks are given in this way, none of the capital gains are taxable. This creates a very attractive opportunity.  If instead you sold the stocks and gave the net proceeds to the charity, the full capital gain would be taxable.  In either case, the full value of the stock donated is recognized for the tax credits. The charity can then decide when they would like to sell the securities and use the proceeds.

Q.  What if I want to give today but I don’t have enough assets available for what I had in mind?

A.  Gifting through Life insurance can create some of the largest gifts. Insurance provides a large lump sum of money on a tax-free basis immediately upon death. Depending on how long you contribute, the impact to your charity could be significant when compared to simply giving cash each year. For example, a 60-year old female could purchase a $100,000 insurance gift for as little as $2,000/yr. Even if she lived only one year the gift would be available to the Charity upon her passing. In comparison to traditional cash gifting, she would have had to donate $2,000/yr. for 50 years in order to give the Charity an equal amount.

Q.  How do I gift through Life Insurance?

A.  There are two common ways to arrange your Life Insurance gift. You can own a Life Insurance policy and simply name the Charity as beneficiary. The Charity will receive the insurance proceeds upon your death and issue a tax-credit to your estate for the full amount of the death benefit. This could help offset tax challenges that may arise in your estate.

The second way to arrange your Life Insurance gift would be to give your insurance policy to the Charity now while you are alive. Every time you give the Charity a donation to pay for the insurance premium, you will be issued a tax credit. This tax credit can be used each year. Upon your passing the Charity receives the insurance proceeds. Since you have been receiving your tax credits annually, no other receipts will be issued upon death.

How you set up the plan really comes down to when you would like to receive your tax credits and how much you want to give. Either way, this is one of the easiest strategies to help you make a sizeable gift. You can begin a new policy to accomplish your goals, or simply make modifications to one you already have.

If you would like to know more about charitable gifting and the different strategies to accomplish your goals please contact:

Director
Member and Public Relations
Saskatoon Community Clinic
foundation@communityclinic.ca
306.652.0300

Robert F. Collins, CFP, CPCA
Financial Planner
Credential Financial Strategies Inc.
Credential Securities
rob.collins@affinitycu.ca
306.955.8590

This article is provided as a general source of information and should not be considered personal advice. Please speak to your personal financial representative before making any financial planning decision or implementing any strategy. Credential Financial Strategies Inc. offers financial planning, life insurance and investments to members of credit unions and their communities. Mutual funds and other securities are offered through Credential Securities, a division of Credential Qtrade Securities Inc. Credential Securities is a registered mark owned by Aviso Wealth Inc