You can support a cause that’s close to your heart in a variety of ways, and it helps to understand your options
By Emmanuelle Gril
While you can give to charity whenever you’re moved to, you get only one chance to do so in your will, and that means you need to plan. Leaving money to charity is called a bequest.
“The donor states in their will that they want to bequeath money or property to a charitable organization,” explains Jean-François Vinet, a financial planner and investment advisor at Assante Capital Management in Brossard, Que. It’s a good strategy for reducing the estate’s tax bill, as the estate will get a charitable-donation tax credit.
Practical Tools
To determine an advantageous tax strategy, you can use a number of online calculators to find the tax credit you would get with your donation, such as those found on canadahelps.org.
You can give money but also publicly traded securities. You—or your estate—will receive a tax credit for the securities’ market value. “And neither the donor nor the organization will have to pay capital gains tax,” Vinet says.
The gift of life insurance involves giving your life-insurance policy to a charitable organization or designating the charity as the beneficiary of your life insurance when you die. If you give the policy during your lifetime, you’ll get a tax credit for every year you paid a premium. If not, the estate will get the tax credit for the value of the policy the organization receives.
You can also make a gift of real property, such as a building or a piece of land, to the organization of your choice. “Even if it’s a second home, neither the organization nor the donor will have to pay capital gains tax,” Vinet explains. “The donor or their estate gets a tax credit on the market value of the building.”
If you make a donation through an endowment in your lifetime or in your will, the interest generated every year from your donation will help to support a designated charitable organization. In this way, your donation can be long lasting and you get a tax credit.
Should you own something of value, you can consider a donation in kind. This could be, for example, a work of art or a stamp or coin collection. The charity will issue a tax receipt for the fair market value of the donation.
With a charitable remainder trust, the donor transfers property, securities, or money to a trust but keeps a life interest in it. That means you keep using the property or receiving the investment income during your lifetime while benefiting from the tax credit right away. The organization will receive the property or the money held in trust when you pass on.
Passing the Torch
Talking about charitable giving with your children and grandchildren is an excellent way to pass the torch to future generations and to make them aware of the importance of philanthropy, says financial advisor Jean-François Vinet. “To start the conversation, ask them what cause they think is important—the environment, health, education. The possibilities are endless.”
That can lead to a discussion about including a gift in your will that will support an organization that is important to them.
