Charitable Giving Strategies



Mark Neufeld

Financial Advisor, Associate Portfolio Manager, Director


Charitable Giving StrategiesGiving to charity is a strong tradition in Canada. Canadian tax filers reported making charitable donations of just under $8.3 billion in 2010, up 6.5% from 2009. At the same time, the number of donors increased 2.2% to just over 5.7 million. 

Canadians contribute in many ways to the nearly 86,000 registered charities in Canada. The purpose of this article is to provide a high-level summary of some ways you can structure charitable gifts other than simply donating cash. 

Gifts in kind 

Under this scenario, a donor gives tangible property to a charity. It must be a donation of actual property, not of personal services. Here are some examples of property that commonly qualify:

  • Stocks, bonds, mutual funds and other publicly listed securities 
  • Segregated fund contracts
  • Real estate and other capital property
  • Depreciable property such as equipment 
  • Certified cultural property (e.g. artwork)
  • Ecological property 
  • Other assets of discernible value such as the inventory of a business 

The amount of the tax receipt issued by the charity is based upon the fair market value of the asset that is being donated. It is important to recognize that, at the time a gift in kind is given, the donor is deemed to have disposed of the property at its fair market value, which means the donor may trigger a deferred capital gain, thus incurring a tax bill. Please note: individuals and corporations who donate stocks, bonds, mutual funds, segregated funds and other publicly-listed securities to a charity do not have to include any portion of the resulting deferred capital gain in their income. Special rules apply for gifts in kind of certified cultural property and ecological property. 

Gifts of life insurance 

Under this scenario, if you own a permanent life insurance policy (e.g. whole life or universal life) or are considering purchasing a new policy of one these types, it is possible to donate it to a charity. To proceed, you would transfer the ownership of the policy to the charity and the charity would become the beneficiary of the policy. The value of the donation will be the policy’s cash surrender value, plus any accumulated dividends minus any loan outstanding on the policy. In addition, a donor can get a tax receipt for all premiums he or she pays for the policy after the charity owns the policy. In general, if the value of the donation is greater than the tax cost of the policy, the donor is required to report the excess as income. 

Charitable gift annuity 

Under this scenario, a donor gives a lump sum donation to a charity with the understanding that the charity will provide a fixed amount of income back to the donor over a specified term, or for life. The charity can fund the annuity on its own; however, most charities will arrange to buy an annuity from a life insurance company. The difference between the cost of purchasing the annuity and the amount of the original donation can then be used to meet the charity’s immediate needs. The donor will receive a tax receipt for the amount by which the gift exceeds the current cost to purchase an annuity from a life insurance company. Much of the income a donor would receive from the annuity is tax-free because part or all of the annuity income is deemed to be return of capital. If the annuity income is more than a donor requires, the donor can donate some of it back to the charity and receive an additional tax receipt.

Charitable insured annuity 

Under this scenario, a donor would donate a life insurance policy to a charity or name the charity as the beneficiary of their life insurance policy. In addition, the donor would purchase a life annuity and use the income from the annuity to pay the premiums on the life insurance policy. The donor can decide whether to take an immediate tax credit for each premium paid or if it is optimal to take a single tax receipt for the policy proceeds at death. 

To further explore these and other charitable giving strategies, please don’t hesitate to contact your Rogers Group Financial contact your Rogers Group Financial advisory team.

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