Planning to give – the right way

Leaving a portion of our estate behind is something that is important, and that we would take great pride in achieving.

For many of us, the ability to leave a portion of our estate to our church or a special charity is something that is important, and that we would take great pride in achieving.

At the same time, we may find ourselves worrying about the impact of such a donation (or series of donations) on the funds available for our other beneficiaries. A little planning however can ensure both your special charity and your heirs are treated as you wish. Below are some strategies that many have used to make a difference without significantly impacting on their estates.

 

GIVING SECURITIES

Consider donating listed securities rather than cash – particularly if you have to sell securities to make the donation. Current tax rules allow for a zero capital gains inclusion rate on donated securities (normally the rate is 50%). That means you reap more tax benefits by giving listed securities than by giving cash.

 

GIFTS OF LIFE INSURANCE

Life insurance is a flexible tool for planned donations. By taking out a life insurance policy and naming a charity as the beneficiary, you can generate a tax receipt for the estate and offset taxes owing on your terminal return. If you turn the policy over to your

charity during your lifetime, you’ll receive a charitable receipt for the cash value of the policy and the premiums become tax-deductible.

 

CHARITABLE REMAINDER TRUSTS

Charitable Remainder Trusts (CRTs) provide an attractive option for those with substantial assets.

The concept is relatively simple: you place income-producing assets into a trust, and receive a tax receipt based on the present value of the asset you are donating (this present value calculation can get complicated but basically it is a calculation that determines the value of the asset today based on the actual transfer date to the charity which is sometime in the future – usually at the death of the donor).

The income from these assets is yours to keep, and upon your death, the assets pass directly to your charity. While a deemed disposition is triggered when you transfer those assets into the trust, all future gains accrue to the charity.

 

CHARITABLE GIFT ANNUITIES

Many insurance companies offer annuities that combine charitable donations with an income-producing annuity.

If the amount invested in the annuity is greater than the total expected payments based on life expectancy, a tax receipt is issued.

With all the planned giving strategies available, it makes sense to take a little time to investigate your options before you make your donation.

 

For a preliminary, independent estate planning review, or for more information on charitable giving, please feel free to call or email.

 

Jim Grant, CFP (Certified Financial Planner) is a Financial Advisor with Raymond James Ltd (RJL). The views of the author do not necessarily reflect those of RJL. This article is for information only.  Securities are offered through Raymond James Ltd., member CIPF.  Financial planning and insurance are offered through Raymond James Financial Planning Ltd., which is not a member CIPF. For more information feel free to call Jim at 250-594-1100, or email at jim.grant@raymondjames.ca. and/or visit www.jimgrant.ca

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