Donate to the Cause: Strategies for Charitable Giving

31 Oct Donate to the Cause: Strategies for Charitable Giving

Although men currently donate more in terms of dollar amount, Canadian women are slightly more likely than men to donate to charitable organizations.[1] That’s changing, though, as women’s income increases over time. Between 1985 and 2014, for example, the value of women’s donations tripled.[2]

When you have financial security – or even if you’re just on your way – you want every dollar to make an impact. That’s why it’s important to have a strategy for charitable giving.

Not all charitable organizations are the same. The first step is to do your due diligence to ensure you’re comfortable with the organization and the way it spends its money.

• Is the charity registered with the CRA? Can they issue a charitable receipt?
• Does the organization have something to show for their efforts? Do they spend most of their money on administrative costs? Do they make a measurable difference in the community?

Once you have chosen the organization(s), it’s time to decide on strategies for giving.

Annual/Monthly Giving

If you decide you want to give a certain percentage of your income to charity, it gives you a good starting place. Some prefer to donate monthly, so they can work the specific amount into their budget more easily.

Whether you give annually or monthly, make sure you receive a receipt for your donation so you can claim the charitable donation tax credit. This is a non-refundable tax credit that reduces the amount of income tax you are required to pay on your tax return. The credit can offset some of your income.

If you’re looking to make a larger contribution, be careful about ripple effects. If you sell a piece of land or sell securities to make a donation to a charity, you may earn money on those transactions that could add to your taxable income. This may, in turn, trigger capital gains taxes or impact your Old Age Security payments.

Planned Giving

Many people designate a specific amount for a special charity in their will. Also known as planned giving, this gift should be named in your will (with the full legal name of the charity) and arranged ahead of time with your lawyer and the charitable organization.

While a cash amount often seems attractive and easy to pass along, it may be better to donate land, securities or mutual funds to the charity in order to save the cash for the estate. Another tactic is to designate the charity as the direct beneficiary of your RRSP or TFSA, which means the money will pass outside your estate entirely. This means that the money won’t be subject to probate fees or exposed to creditors. However, it works best only if the entire value of the account goes to the charity.

Finally, keep in mind that you can split up your donations into several tax years in order to offset the greatest amount of income. You can carry the credit forward up to five years.

Life Insurance

Another form of planned giving is through an insurance policy. Purchase a whole life insurance policy for this purpose, either designating the charity as a beneficiary or designating the estate as a beneficiary and then making a bequest in your will. This strategy works best when you intend to give a large amount to the charity and only the charity.

To learn more about planning your estate, contact us.

[1] https://www150.statcan.gc.ca/n1/pub/11-008-x/2012001/article/11637-eng.htm#a4

[2] https://www.charitableimpact.com/blog/do-women-or-men-give-more-charitably/

Joel Rose

With over 35 years of experience, Joel Rose helps families – and their businesses – to prepare for the future. He offers guidance and support to help his clients create estate plans and succession plans that meet the needs of the whole family. Through his extensive professional and personal experience, Joel is known for his compassion and his ability to find a creative solution to meet each family’s needs.