By Olev Edur and Emmanuelle Gril
I’ve been thinking about contributing more to charity. I currently donate to two favoured charities—World Wildlife Fund and United Way—and I’d like to consider some others. The problem is that I’ve heard some unfavourable news about certain charities. Is there any way to check up on a charity before giving it money? How do I find out if my dollars are actually going to help someone and not just paying for advertising or going into the pockets of executives?
It’s very noble of you to consider expanding your charitable horizons, and you’re in luck as far as evaluating charities’ performance goes because there are now a number of organizations that do just that.
For starters, you can visit Charity Intelligence Canada, which investigates the finances of Canadian charities and provides listings of those with the highest impact—that is, those that make the most effective use of donated funds. Similarly, there’s help available on the Canadian National Christian Foundation website.
If you want to go farther afield and consider global possibilities, you might also visit the website of Give.org, based in Arlington, Va. This is a US Better Business Bureau-affiliated organization that analyzes and provides accreditations to charities in the United States and beyond.
Good to Know: Types of Giving
There are three major types of donations, says Fabien Major, a financial professional and personal-finance columnist. “You can give money, an asset, or shares, for example,” he says. “You can also make a planned gift in your will or choose to make a recurring gift—funds will be automatically debited on a regular basis from your bank account or charged to your credit card.”
Planned giving lets you give a certain amount to an organization after your death. Such bequests are written into a donor’s will, which is preferably notarized. “This gift will generate a non- refundable tax credit that will be applied to the estate,” Major says. A planned gift can also involve transferring an asset or some shares. In the case of assets or shares, there will be no tax to pay on the capital gain.
Donating life insurance is an interesting possibility. Here, you give a new or existing life-insurance policy to the organization of your choice. The owner of a policy can choose a charity as their beneficiary. “If it has a cash value, you can get a tax credit by calculating the present value of the policy,” Major points out.
Giving through an endowment fund is another option. In this case, the interest generated annually by your gift allows you to support the cause of your choice. This is a good way to stretch out your gift over a long period. Again, this type of gift comes with a tax credit.
Major notes, however, that contrary to a persistent myth, these tax deductions will never reach a high enough level to reduce your income taxes to zero. That’s why, whichever tax strategy you choose, you need to be aware that the money is still coming out of your pocket.
