Canadians generously give to charitable and not-for-profit causes for many reasons. For example, some:
- feel compassion for others’ needs;
- are moved to give to a cause in which they believe;
- have a friend or loved one who has been affected by a situation for which there is organizational support; or
- fulfill religious obligations or beliefs.
Still others look forward to a tax credit for their donation. The Federal Government provides a 29 per cent tax credit while Ontario provides an additional 11.16 per cent. Thus, our generosity is founded upon some great reasons for giving.
Unfortunately, there are times when people hesitate to give to causes because they are not confident that the money will be used efficiently or they feel that they cannot afford to give. This hesitation can be minimized by embarking on a course of planned giving, wherein an organized, continuous, long-term approach to gifting balances financial, personal, family and philanthropic objectives of the giver, often with the help of financial, legal or other professionals.
There are a number of ways that one can choose to donate to a charity or cause. Most gifts are done by way of a legacy or bequest in a will, including leaving a dollar amount to a charity, a percentage of one’s estate to a charity or one’s entire estate to one or more charities. Gifting by will is especially appropriate for those who are uncertain as to how much they and possibly their surviving spouse will need to live until death.
Other options for donations include but are not limited to:
1. Donating marketable securities. If public shares have increased in value, it is more tax efficient to gift them to the charity directly rather than selling them and giving the proceeds of sale to the charity;
2. Designating a charity as beneficiary on a life insurance policy. A large policy can be purchased for a relatively modest premium. Furthermore, the tax receipt can assist the estate on the donor’s death;
3. Designating a charity as beneficiary on a Registered Retirement Savings Plan (RRSP) or Tax Free Savings Account. This has several advantages including a direct transfer to the charity upon your death as well as the estate receiving a tax credit from the charitable contribution which will offset any taxes owed regarding the RRSP. The gift will also be outside of your estate and therefore, not subject to creditors or any possibility that your will is declared invalid;
4. Gifting through a community foundation. Advantages include the ability to have your own ‘foundation’ without the administrative requirements of a private foundation as well as to recommend which charity should receive distributions from the funds.
5. Gifting through a private foundation. Here, all funds can come from one person and the board of directors may be related to each other. When funds are donated to a private foundation, the donor receives an immediate tax benefit. As it is a charity, it also has annual CRA reporting requirements.
If you wish to discuss how best to donate to a charitable or not-for-profit cause of your choice, please contact Andrea Kelly.
Andrea Kelly, Lawyer, has extensive experience in wills, trusts, powers of attorney and estate administration matters. She provides clients with a high standard of timely professionalism and expertise, incorporating a very thorough fact finding process. This is quite often enlightening for her clients and facilitates individually tailored services. If you would like to know more, feel free to use the easy contact form or read Andrea’s bio.