Derek, I am interested in ways to donate to charity — what are some ideas here?
I strongly applaud and encourage charitable interests during your lifetime and through your estate. Each of us knows of a charity that is close to our heart and there is certainly some benefit in helping these charities succeed.
Most of us help charities on a regular basis, either by donating to their causes through fundraising, fun-runs or dumping buckets of ice-water on our heads — there is no shortage of opportunities to make donations. Small donations require little or no planning whatsoever and many people do so without second thinking.
With that in mind, a large donation should be well planned and discussed with your family. If done correctly, the charity can greatly benefit either during your lifetime or ultimately when you pass away.
One way to donate is to gift shares of a publicly traded company to a charity. One of the greatest advantages here is that if the shares had appreciated in value they won’t be subject to capital gains when donated directly to a charity.
An additional benefit is that you will receive a tax receipt for the fair market value of the shares and the charity will then have access to the funds once they sell the shares. It also doesn’t have to be shares of a public company, as these rules may also apply to bonds, mutual funds and other investments.
What if those shares are in a loss position? The same benefit applies, except that when you donate the shares to a charity you may also claim your capital loss against previous gains. So in this case, you get a tax receipt and a capital loss.
Even though the shares may not be worth what they once were, whatever the value may be is still a benefit to the charity. This can be a strategy to get rid of the “losers” in your portfolio and help out a worthy cause.
In either example, the shares must not be held in a registered account such as a RRIF or RRSP. Furthermore, I strongly suggest that this type of donation requires some discussion with a tax specialist and some additional planning.
If you’re interested in donating the remaining value of your RRIF or RRSP to a charity, you can name a charity as your final beneficiary in the same way that you name a family member. Once you pass away, the assets would transfer to the charity. Your estate also receives a tax credit and the funds do not have to go through probate.
While not a straightforward process, a little planning and professional advice can go a long way here for your charity of choice.
Another consideration for charitable giving includes donating proceeds from life insurance. Depending on the policy, this donation could be made during your lifetime or when you pass away.
Insurance may be one way to create a notable donation while the cost includes your annual premiums. An insurance specialist should discuss this strategy with you further.
Beyond this, there is an opportunity for older donors to create a “charitable remainder trust.” A charitable remainder trust provides income for life to the donor, an immediate tax receipt for the remainder interest, and a gift of the capital to the trust or to a charity at the death of the donor.
Usually, the minimums for these types of trusts are quite large, but depending on your financial situation, your age, and your charitable intentions, there may be sincere value in exploring this further with a qualified adviser.
Making substantial donations to charities is an honorable undertaking. While I strongly encourage the endeavor, be sure to speak with a qualified professional who can guide you accordingly to ensure that your wishes are completed in the most efficient manner.
Derek Fuchs is a wealth adviser with ScotiaMcLeod in Red Deer, and a certified financial planner, financial management adviser and a fellow of the Canadian Securities Institute. He can be contacted at email@example.com.