PTBOCanada Featured Post: Charitable Planned Giving with Matthews + Associates

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It’s a new year! Even though the holidays are over, we want to extend the spirit of generosity by looking at charitable planned giving.

Charitable planned giving is planned gifting to your favourite organization or charity. If there are organizations and causes that are important to you, it makes sense to create a plan that allows you to have the biggest impact on the organizations that mean the most to you. There are almost no limits to the creative ways you can give.

Below are some of the ways you can begin to think about your planned giving strategy:

Wills

Leaving money to your favourite charity isn’t a complicated planning process. If you have a will in place, it is as simple as specifying a gift to the charity of your choice. It could be a specific dollar amount or the remainder of your money once everyone you want to leave money to has been gifted. It's simply a matter of having a conversation with your advisor and your lawyer and letting them know your wishes.

Donor-Advised Fund

Another strategy is a donor-advised fund. A donor-advised fund is basically your own foundation that’s carved out of a larger foundation. It acts in the exact same way as a larger foundation. No setup costs and the parent foundation takes care of all the administration.

It works by putting money into your own donor-advised fund. Once you do this you will receive a charitable tax receipt, but you maintain control of the money by designating who receives your donation. The only stipulation, according to the CRA, is that each year you must give a certain percentage of that fund to charity. You can invest that money, start to generate income, and then create charitable gifts every year from the income out of that fund.

One of the many amazing things about donor-advised funds is they are a way to create a legacy for your charitable giving that furthers the mission and vision of your charity. They are also a great tool to offset taxes in a year you have a large liquidating event, such as selling a business. For example, you can plan your next 5 to 10 years of planned giving into the Donor-Advised fund and receive approximately a 50 per cent tax credit to offset your capital gains; then give that money to charity over the next 5 to 10 years.

 

CPP

Some people are in a fortunate situation where they have more than enough cash flow in their retirement. At a certain point, the government makes you collect Canada Pension Plan, or if you have money in your RSPs, you must transfer that into a RIF and start taking the minimums.

Suddenly, you may be paying more tax and don't need the extra cash flow. This extra CPP cash flow can become something that you redirect. You can donate it and get the offset of a tax receipt. In addition to this, you can also redirect CPP income to a life insurance policy to pay the premiums which can then be gifted to the charity of your choice.

Life Insurance

Typically, there are two ways to gift life insurance to a charity.

The first is if you have a policy, you can donate that policy to a charity, and then you can continue to make the premium payments, these become the equivalent of a charitable donation. You will also get a charitable tax receipt every time you pay the premium.

The second is to make the charity the beneficiary of your life insurance policy while you continue to be the owner of the policy. You pay the premiums, and there's no tax credit for those premiums. However, once you pass away, your estate will then get a charitable tax receipt equal to the proceeds of that life insurance policy.

Gifting your life insurance can allow you to have a much larger impact. It doesn’t allow you to give today, but it creates a large impact later on.

Beneficiaries

When it comes to Tax-Free Savings Accounts or Retirement Income Funds, we can put a charity– or multiple charities as the beneficiary. When you pass away, the charity will receive those funds and the estate will get a charitable tax receipt. This is often used with RIFs. Roughly 50 per cent of what’s left in a RIF can go to the CRA because it’s fully taxable income in the year you pass away. If that money is left to charity, you’ll get a tax receipt, and it will help to offset taxes for the estate.

Strategizing your Charitable Planned Giving

There are many creative options when it comes to planning your charitable gifting strategy. You’re only limited in terms of how creative you can be. Planning allows you to give in the best way possible and have the biggest impact on the organizations that mean the most to you.

Building to retirement is a project; and like any great project, it begins with a good plan. In our podcast “Charitable Planned Giving”, available on Apple Podcasts, Spotify, Stitcher, Google Podcasts, or by RSS, we answer those burning questions about retirement. We help you learn how to optimize your investments, reduce your retirement risks, lower taxes and build true wealth, in an easy and accessible way.

**If your business/organization is interested in a PTBOCanada Featured Post Advertorial, email Publisher Kirtus Evoy for info!

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