Stock market guru Warren Buffet’s recent decision to make a significant donation to the Bill and Melinda Gates Foundation generated wide publicity and raised awareness about various approaches to charitable giving. Many Canadians want to give back to their community by supporting local, national and world charities. Furthermore, recent federal budget changes eliminating the capital gains tax on the donation of publicly traded securities has sparked more interest in philanthropy.
Legacy planning is now becoming a hot estate-planning topic. Many are realizing the value of strategically planning ahead to maximize contributions to their favourite charities while simultaneously taking advantage of the tax and estate planning opportunities associated with charitable giving. You or your family don’t have to be wealthy to take action. By planning ahead and strategically defining your charitable giving approach, you will find that a well placed gift can make an impact.
You may be familiar with making annual donations to support your favourite charity. But how do you go beyond an ad hoc approach and build an enduring legacy? Here are some of the ways you can make a donation: You can designate a charity as a beneficiary in your will and leave them a donation of cash, securities or other property; you can name a charity as the beneficiary of your insurance, pension plan, RRSPs or RRIF; or you can also set up a donor-advised fund.
A donor-advised fund is a smaller scale equivalent of a private foundation where you donate to charities of your choice on an ongoing basis through a vehicle called a donor-advised fund set up for that purpose.
How does a donor-advised fund work?
You or your family decides to make a donation on an ongoing basis. Using a donor-advised fund, you name the fund and, each time a charitable gift is sent to the charity of your choice, it is made in the name of the fund. The initial donation to establish the donor-advised fund can be in cash, stocks, bonds, mutual funds or insurance. Minimum amounts, generally $25,000, are required to establish a fund, while subsequent donations can be smaller. You receive an immediate tax receipt for the donation, which can be carried forward up to five years, and retain the right to advise the program administrators on how the income from your donation is to be allocated each year. Your designated charities may remain the same from year to year or can vary if you wish. You can also name a successor to continue your legacy and ensure the continuity of your giving strategy across generations.
There are many opportunities to intentionally pass on resources to a societal issue or community that reflects your values and beliefs. Develop an informed strategy to guide your approach with the ultimate goal of maximizing your contribution.
Bev Moir is a financial planner with The Moir Team at ScotiaMcLeod in Toronto. ScotiaMcLeod is a division of Scotia Capital Inc., a member of the Scotiabank Group. Member CIPF.
This article is for information purposes only. It is recommended that individuals consult with a financial or tax advisor before acting on any information contained in this article. The opinions stated are not necessarily those of Scotia Capital or The Bank of Nova Scotia.
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