Planned giving is about matching a donor’s tax and estate planning goals with his or her philanthropic ideals. Planned giving is tax-smart giving. Planned giving maximizes tax benefits and protects the interests of the donors and their family. Gifts through one's estate are the most common type of planned giving. However, whether giving through one's estate or during one's lifetime, planned giving ensures the donor's financial and philanthropic interests are met. Think of your charitable giving as part of your overall estate and tax plan. The gift itself often takes place at a time in the future but is established today and can have immediate tax benefits.
On a broader scale, planned giving protects one generation’s values for the generations that will follow. Each planned giving donor will identify key initiatives and organizations that they wish to support. In doing so, they ensure these initiatives and organizations carry forward to assist future generations. Planned giving offers you a chance to perpetuate your values and your commitment to your community. It is a wonderful and powerful way to give.
Planned gifts allow you to:
• Gain valuable income tax credits now, or on your final estate income tax return;
• Enjoy current tax savings and secure a lifetime income for yourself and/or your spouse;
• Establish a memorial fund in the name of a loved one;
• Provide a significant legacy with a small current contribution; and/or
• Leave something truly meaningful for people to remember you by.
There are several ways you can plan to make a gift to GHCF. The option(s) you choose depends on your circumstances and financial objectives. The options can include a strategy of gifting through such means as, for example:
• A gift of property made now or a gift of a residual interest in property;
• A gift of a life insurance policy;
• A gift of Registered Retirement Savings Plan or Registered Retirement Income Fund;
• Establishing a charitable remainder trust; and
• A charitable gift annuity.
Different giving strategies have differing income tax and legal implications for the donor. The description of the various strategies set out below is intended as a general overview only. Large gifts, such as bequests, require careful planning and timing, and the tax considerations are important. GHC Foundation recommends that potential donors of significant gifts obtain advice from a tax adviser before making the gift to ensure your philanthropic goals are met.
If you wish to receive more information about the Gabriola Health Care Foundation, we can talk with you and your advisors to help ensure your planned gift fits your wishes, financial objectives, family needs, tax situation and our funding objectives. We can answer any of your questions with complete confidentiality, and without any obligation on your part.
Depending on your circumstances, there may be ways to benefit the Foundation without reducing the amount your children will receive. For example, if a couple wanted to leave their $100,000 RRSP to their children, there could be only roughly $50,000 available to them after tax. On the other hand, if the couple purchased a life insurance policy of $100,000 to replace the RRSP, the amount left to their children, even after the cost of premiums, could in many cases, exceed the $50,000 they would have otherwise received. The net result is a double benefit: GHCF receives a gift and your estate is enhanced.gline
If you have the assets available and could use the tax benefits now without affecting your lifestyle, consider the transfer of property today. Your gift may be cash, the transfer of marketable securities or personal property. You receive an immediate tax receipt for the full amount. An endowment fund could be established in your name and you can witness the goodwill your gift will bring during your lifetime.
Monthly giving is convenient for you and you have the pride of knowing that your monthly donation provides a dependable source of funds to help us make long-term plans for the Foundation’s programs. You determine how much you are comfortable giving every month and authorize your bank or credit union to transfer that amount to the Foundation each month, or you can authorise the Foundation to deduct it automatically from your account. It’s easy and effective, and you can change the amount or cancel any time.
A gift-in-kind is a gift of property such as real estate, securities, artwork, jewellery or collectibles may provide you with financial planning rewards in ways you’ve never imagined. After independent appraisals you will be issued tax receipt.
In some cases you can receive tax benefits and continue to have possession of the gifted property during your lifetime. In this case you would irrevocably assign ownership of the property now and receive the tax benefits, while continuing to possess the asset. The eventual sale of the property would provide funds to support the work of the Foundation.
A gift now, rather than a bequest, should also have the benefit of reducing probate costs, even if you retain possession of the asset.
Note that a gift may be considered to be a disposition of property, triggering a gain, so there are potential tax implications associated with such a donation. However, in most cases the donation tax credit will exceed any tax payable.
The donation of securities with accrued gains is a gift-in-kind, but one that is subject to special income tax rules.
If you have shares or other qualifying securities that have increased in value you could donate them to the Foundation and, if an individual, avoid being taxed on the capital gain while still receiving a tax receipt for the full value of the securities. This can be the least expensive way to give.
Securities that will qualify for such treatment are publicly-traded securities listed on Canadian and major international exchanges including stocks, trust units, exchange-traded funds, warrants, etc., as well as mutual fund units and bonds.
Note that you can avoid the tax on the capital gain only if the securities themselves are donated to the Foundation. The double benefit will not be available if the securities are sold and the proceeds donated.
If you have securities that have declined in value, remember that capital losses can be carried back 3 years to offset capital gains previously realized so as to generate a tax refund. You could therefore gift depreciated securities to GHC Foundation, realize a capital loss, and apply that loss against past or future capital gains. GHCF will issue a charitable donation tax receipt for the current value of the donated securities and the receipt may be used to reduce the tax payable for the year of the donation.
If you wish top donate securities to GHCF please contact is at ghcf@ghcf.ca or call us at 250-247-7411 and we will help facilitate the transfer and provide you with your tax receipts. Thank you!
You can make a larger gift than you might expect possible by naming GHCF as the owner and beneficiary of a new or existing life insurance policy:
• You can transfer ownership of a new or existing policy and get a tax receipt for the net cash surrender value at the time of the donation plus the full amount of any premiums paid after the date of the transfer.
• Rather than transfer ownership now you can make the Foundation the beneficiary of a policy and the estate will receive a tax receipt equal to the amount of the death benefit paid to the Foundation.
A gift of life insurance is private, in the sense that it does not involve the donor's estate or will. Depending upon how it is structured, it can also provide income tax savings to the donor now and a substantial gift to the Foundation in the future.
A charitable remainder trust is an option to consider when a donor wishes to give significant assets to the GHCF, but also wishes to continue to receive the income from those assets until his or her death or the death of a spouse, or for a specified period. A donor may establish a charitable remainder trust with cash, securities or real estate. The assets are irrevocably placed in a trust managed by a trustee. All of the income from the gifted property will paid to the donor for the life of the donor (or a surviving spouse.) On termination of the trust the gifted property is transferred to GHCF.
In Canada charitable remainder trusts are irrevocable. The donor, therefore, is usually entitled to a tax receipt when the trust is created, based on the net present net value of the residual interest.
Advantages:
• the donor would receive an income tax receipt at the time of the creation and funding of the trust, which could provide significant and immediate income tax savings;
• the donor continues to receive the income generated by the assets or to enjoy the use of the property; and
• the donor may avoid probate costs with respect to the transferred assets.
A charitable gift annuity also allows the donor to make a significant immediate gift to the Foundation while generating an income stream for the donor during the donor’s lifetime. The donor transfers a sum of money to the Foundation and an agreement is drawn up authorizing the Foundation to use a portion of this sum to purchase an annuity. The annuity will provide a fixed income to the donor throughout the donor’s lifetime. Depending on the donor’s age, this income can be wholly or partially tax free. The balance between the cost of the annuity and the total sum transferred (typically about 25 per cent) is kept as a donation by the Foundation and a tax receipt is issued for that amount.
The advantages are that
• the donor receives an immediate tax receipt;
• the donor is guaranteed fixed payments for life without having to manage the investment; and
• probate costs associated with the contributed assets are generally avoided.
An endowment fund is a donation, now or as a bequest, which is invested, with the earnings generated on the principal used to support the Foundation’s work year after year, generation after generation. You can let the Foundation decide where the earnings are most needed or you can specify certain restricted uses. If you desire, your gift can be named in your honour in recognition of your support, or you may choose to name your gift in memory of a special person. Your name and generosity are perpetuated and your community reaps the benefits.
You can plan today to leave your legacy without parting with your assets during your lifetime. This may be in the form of a Will bequest or via a life insurance policy.
Make a gift of cash or property by including the Gabriola Health Care Foundation as a beneficiary in your Will. It is one of the simplest planned giving options to arrange and it can significantly reduce the tax payable by your estate. This gift could be a specific asset (RRSP’s, marketable securities, land, etc.), a fixed amount, or a percentage of your estate.
Types of bequests:
• A specific amount: a specific dollar amount (or a particular piece of property).
• A residuary gift, that is, the amount remaining in your estate after other payments, debts and gifts have been distributed.
• A contingent gift, that is a gift made in the event that none of your named beneficiaries are alive at the time of your death.
• A bequest can be subject to a trust, allowing a donor to provide a lifetime of income to a named beneficiary, while at the same time providing a substantial gift to the Foundation on their death.
Tax advantages
Among other benefits, a bequest entitles the estate to a charitable gift receipt for the full value of the bequest. The estate may claim the credit in the year of death and the proceeding year equal to, in each case, 100 per cent of net income. This can significantly reduce the amount of tax payable by the estate.
How to Leave a bequest
To include a bequest to the Gabriola Health Care Foundation in your will consult with your legal advisor to help you prepare a new will or revise your existing one. Wording similar to that set out below might be adopted.
Sample wording
Residual bequest
I direct my Executors to give ____ per cent of the residue of my Estate to the Gabriola Health Care Foundation for use where it is most needed as determined by the Gabriola Health Care Foundation in its absolute discretion.
Specific bequest
I direct my Executors to give the sum of $____ to the Gabriola Health Care Foundation for use where it is most needed as determined by the Gabriola Health Care Foundation in its absolute discretion.
Restricted bequest
Both a residual and a specific bequest may be restricted to a particular use rather then a general bequest. As the Foundation's needs can change sigificanlty over time an unrestricted gift is preferred. However, should you wish to put restrictions on your gift it is preferred that the restrictions be as general as possible so that the gift can ba addapted to changing circumstances. The Foundation is happy to assist you in this regard.
If the beneficiary of an RRSP or a RRIF is someone other than a spouse, a common-law partner, or a financially dependent child or grandchild, the proceeds of the donor’s RRSP will be taxed as ordinary income in his or her estate and the net proceeds may be subject to probate fees.
GHCF can be named as the beneficiary for all or a part of a Registered Retirement Savings Plan (RRSP) or a Registered Retirement Income Fund (RRIF). The RRSP or RRIF would still be taxable in the estate on the death of the donor, but the income tax receipt issued by the Foundation for the value of the gift from the RRSP or RRIF at the time of death could reduce or eliminate any income tax owing and should not be subject to probate fees.
The Canadian Income Tax rules, as set out in the Canada Revenue Agency’s WEB site, are, we understand, as set out below. (However, income tax rules change from time-to-time so please check with the CRA WEB site.)
How is my tax credit calculated?
The first $200 you donate is eligible for a federal tax credit of 15% of the donation amount. After the first $200, the federal tax credit increases to 29% of the amount over $200. Generally, you can claim all or part of this amount up to a limit of 75% of your net income. For gifts of certified cultural property or ecologically sensitive land, you may be able to claim up to 100% of your net income.
You may also be eligible for a provincial tax credit. The amount of the provincial tax credit available varies between provinces.
You do not have to claim all of the donations you make in a year in that year’s income tax return. You can carry forward any donations you do not claim and claim them in your return for any of the next five years.
How do I claim gifts made in the year of death?
Many people include gifts to charities in their wills. If you are preparing a return for a deceased person, you can claim the eligible amount of gifts that the person gave in the year of death including those that the person bequeathed in the will. You can claim the lower of 100% of the deceased person's net income, or, under proposed legislation, the eligible amount of the gift(s) donated in the year of death (including gifts by will), plus the unclaimed portion of any gifts made in the five years before the year of death. Any excess can be claimed on the return for the previous year (up to 100% of the deceased's net income for that year).