Leaving a Legacy by Gifting to a Charity

If you have a charity or cause that you feel strongly about, you’ve likely made a donation to help support it.  Of course, this helps the charity and, as the donor, you benefit from a tax credit for your gift.

But did you know there are other ways to give to your favourite charity? And to give even more? Some options can greatly increase the funds your charity receives while providing you with added benefits such as a lower tax bills.

Listed below are options you may wish to consider when planning your next charitable gift.

Donor Advised Fund
This is a fund that you, your family, or an organization creates with an upfront donation to a third party, such as a foundation.  You can name the fund after yourself, after a cause, or in honour of a loved one.

The foundation looks after your fund’s administration. Normally, they invest your donation so it earns money on the capital. Each year, they report on the amount of money you have earned and have available to give. You then pick the charities you want to support, and the foundation issues the cheques.   A donor advised fund is a nice alternative to setting up your own foundation, which is usually expensive to do.

Life Insurance Benefits
Life insurance provides a creative way to make a significant donation to your favourite charity.  To begin, you choose a life insurance policy and name the charity as the beneficiary. Then, you can choose from one of two tax credit options:

  • You receive a charitable tax credit each year for the premiums paid for a life insurance policy, or
  • Your estate receives a tax credit for the full amount of the policy’s death benefit. This can be used to offset taxes that your estate may owe due to RRSPs or RRIFs.

With this option, you can provide your favourite charity with a substantial gift, while gaining tax benefits for yourself, or your estate.

Charitable Remainder Trusts
In this arrangement, you donate money, equities, or property to a registered charity. However, you continue to use the property and/or equities, receiving their income while you’re still living. When you’re gone, your beneficiaries receive any remaining income,while your charity gets the principal after a specified period of time.

There can be several tax advantages with a CRT. For one example, the asset(s) you donate are removed from your estate, which reduces the taxes your estate will pay.

There are three types of charitable trusts:

  • A charitable remainder annuity trust which pays a fixed amount each year
  • A charitable remainder unitrust which pays a fixed percentage of the trust’s value annually
  • A charitable pooled income fund which is set up by a charity allowing many donors to contribute

The important thing to note, that no matter which you choose, charitable trusts exist in perpetuity and are either completely or partially exempt from most taxes.

As you can see, there are different options for giving to your favourite charities. We can explore these options with you and, if needed, connect you to other professionals who can help you achieve your philanthropic goals.

Contact us for a complimentary, no-obligation appointment at your convenience to learn more.