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Charitable Giving

ruby-lougheed-yawneyRuby Lougheed Yawney is a Certified Financial Planner with Lougheed Financial Planning. She can be reached at : Email:

Giving can help others-and yourself.

When it comes to charitable giving during the gardening season, I like the words of the late oil and gas magnate Clint W. Murchison, who said: “Money is like manure. If you spread it around, it does a lot of good, but if you pile it up in one place, it stinks like hell.”

More Canadians should be thinking about making charitable donations. It won’t kill you and it may not even hurt. Many people are truly blessed when they give, we have all heard the saying “it is better to give than to receive.”

That reminds me of a true story told to me by a friend. It is about a young boy who was asked if he would donate blood to help his sister. You see, she had a serious disease, and her only chance of recovery seemed to be a transfusion from her five-year old brother who had miraculously survived the same disease and had developed the antibodies to combat the illness. The young boy hesitated for only a moment before saying: “yes, I’ll do it if it will save her.” The transfusion went well, and as the two siblings lay side by side in the hospital just after the transfusion, the little boy turned pale, and with a trembling voice asked: “will I start to die right away?”

This brings the meaning of giving to a whole new level. Today, we listen to the news of a famine in the horn of Africa. Someone may die if we, in the land of plenty, don’t give.

Let me share a few ideas that will not only help the causes you believe in, but will save you tax along the way. And don’t forget, your gift has to be made on or before Dec. 31, 2011, in order for you to claim a donation tax credit in 2011 for your generosity.

Give strategically. There’s a difference between charitable giving and strategic philanthropy. Charitable giving is short-term, often unplanned, little creative research or follow up. This is not a bad thing. Giving on a whim helps, and I hope everyone will continue to do it as they feel with some of your charitable dollars but strategic giving is different and involves developing a plan around your giving.

Ask yourself these questions: What do I want to accomplish with my giving? How much am I going to donate in the next three years? What charities will receive my donations? When will they need those funds? What is the most effective way to give those funds so that I can be the best steward of what I have? It is more long-term, comprehensive planning; think of it like you think about where you want to invest. Most importantly, it needs to be based on your values and vision for the future, what is really important to you and your family?

Donate securities to charity

It may be one of the best kept secrets that you’ll save more tax by donating securities to charity than cash. And the securities you donate should generally be those with the largest accrued capital gains per share.

Why? Any capital gain on the transfer of publicly traded securities to a charity is eliminated under our tax law. This is in addition to the donation tax credit which you’ll receive for the donation. The larger the gain on the securities, the more tax you’ll eliminate.

Donate matured flow-through shares to charities

With flow-though share you’ll generally be entitled to a tax deduction for the cost of the shares, which reduces your financial risk somewhat. In addition to that tax deduction, you might consider donating your flow-through shares (purchased prior to March 22, 2011) to a registered charity when they mature, which will provide you with additional tax savings from the donation tax credit.

Suppose you purchased $10,000 worth of flow-through shares, #1) you get the deduction against income (T5013) in the year you purchased them and deductions in subsequent years saving you an approximated $4,600 in tax deductions, assuming you are in the highest marginal tax bracket in Ontario. #2) If you donate your rolled-over or matured flow-through shares, you get the donation receipt for the amount you donated, so, if the investment is worth $10,000 when you donate it, another $4,600. #3) If your flow through was purchased before March 22/2011, you will pay no tax on your capital gains from the sell of your flow-through shares. In this case, you will have received $9,200 back in tax savings in total, on a $10,000 gift to charity. It’s truly a triple play financially!

Assign a life insurance policy to charity

If you have a life insurance policy that you don’t particularly need for other purposes any more, consider assigning the policy to a registered charity.

In this case, you’ll be entitled to a donation tax credit for any cash surrender value accrued under the policy, and you’ll be entitled to additional donation tax credits for each premium payment if you continue to pay the premiums on behalf of the charity each year.

In this case, don’t expect a donation tax credit in the year of death for the death benefit paid to the charity.

You might also consider making a lump sum donating to the charity in addition to assigning the policy, which will enable the charity to then purchase an annuity with that lump sum.

The annuity income can be used by the charity to pay the premiums on the policy that you’ve assigned to the charity.

Name a charity as beneficiary

You can name your favourite charity as a beneficiary of your RRSP, RRIF or life insurance policy.

By doing you will be provided with a significant donation tax credit in the year of your death, which can offset other taxable income you might have in that year from the taxable income from the RRSP’s or large capital gains, like on a cottage.

The donation receipt will be for the value of the assets transferred to the charity after you’re gone, and in the case of the life insurance policy the receipt will be for the death benefit paid to the charity upon you death.

Give the gift of giving

Having a tough time deciding what to buy someone? Consider a charity gift card. You can visit online and click on the charity gift-card link. CanadaHelps is a registered charity itself that makes it possible to donate to any registered charity in Canada.

You can purchase a charity gift card, for any amount, using your credit card. You then specify who is to receive the gift card, and the card is then e-mailed to that recipient.

The recipient is then able to go online and specify which registered charity in Canada should receive the dollar amount on the gift card. That amount is then paid to the registered charity.

As the giver, you’ll receive the donation receipt and can claim the tax credit (so the gift actually costs you about 54 cents for each dollar given if you’re in the highest tax bracket; this varies by province).

Fully utilize matching programs

Many Canadian companies have donation matching programs. Contact your payroll or HR depart to see if your company does, and don’t be shy, if they don’t, ask them if they will. Sometimes they will match 100% to a major charity, like the United Way, for example, so you can specify your favourite UW member agency (for example Big Brothers Big Sisters) to your HR/payroll department and your donation can be doubled! Often there is a limit, but take full advantage of the program to get more for your favourite charity.

Ruby Lougheed Yawney



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The opinions expressed are those of the author and may not necessarily reflect those of Manulife Securities Incorporated

Insurance products and services are offered through Manulife Securities Insurance Inc. (a licensed life insurance agency and affiliate of Manulife Securities) by Manulife Securities Advisors licensed as life agents.

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