Charitable Giving Strategies

giving

Canadians are very generous with charitable giving. Many do so without thinking too much about it. However, it can also be strategic with a carefully crafted plan tailored for a specific goal.

Reasons for charitable giving

What causes attract you? Where do you want to make an impact—at home, or overseas? How would you measure the success of a donation? How exactly do you want to make the world a better place?

The more you understand where your desire to give back comes from, the better able you’ll be to match charitable intentions with appropriate actions.

The best time to give

Some people want to make charitable gifts while alive, so they can see the impact personally. Others want to ensure their quality of life isn’t diminished, so they make donations through their wills.

Both are viable options, but the decision may well affect how you structure your gift. Some giving strategies are better suited to donations made in the here-and-now; others work better after death.

Implications on finances

It’s useful going through a few ‘what if’ scenarios to make sure charitable giving won’t cause unintended financial consequences.

When giving via your will, consider how those gifts impact your heirs. More money to charity means less money for them. Perhaps that’s less of a concern if your children are older and financially self-sufficient but it’s worth thinking about.

The effect on the tax return

One financial advantage of charitable giving is the tax benefits from both federal and provincial governments.

The federal charitable tax credit rate is 15% on the first $200 of your donation, and 29% on anything above that – to a maximum of 75% of your net income in any given year.

For gifts of certified cultural property or ecologically sensitive land, you may be able to claim up to 100% of your net income.

In any one year, you can claim donations made by December 31 of the applicable tax year, as well as any unclaimed donations by you or your spouse made in the previous five years.

When giving securities to charities, the capital gains associated with these securities is not taxable.

When giving Cultural property to Canadian Institutions and public authorities, the tax credit is not limited to a percentage of your net income.

Choosing a charitable giving structure

A few hundred dollars is straight forward. However, if you’re planning to make a more substantial donation you’ll want to investigate more complex giving strategies such as life insurance or even private foundations.

These strategies give you tremendous flexibility over the timing of your gift, and come with significant tax advantages.

One structure that has become increasingly popular is the donor-advised fund. It offers similar flexibility to a private foundation, with much lower fees and fewer hassles.

It’s a good option for people committed to more strategic giving - donor advised funds can be found at many community foundations like the Calgary Foundation and at many mutual fund companies in Canada.

Which charity to support

With more than 85,000 registered charities in Canada, there are plenty of options. That’s not to say all of them are equally well-managed, or equally capable of achieving their charitable goals.

Before you make a donation, make sure the charity you’re considering is worthy.

Ask questions of the management. Make sure the charity is seeing tangible progress with its projects, rather than just throwing money at a problem. And always check with the federal government’s listings of registered charities to ensure the one you’re considering is legitimate.

CanadaHelps

CanadaHelps is a nonprofit serving Canadian charities and donors across Canada by making it easier to donate and fund raise on line.

As a charity serving charities it plays a critical role in the charitable sector. It provides ideas to create a giving strategy, reports on trends, challenges and opportunities in the charitable sector.

The website provides links to specific charities and new charities by browsing each category. It also links to campaigns to learn about specific needs.

It provides instant tax receipts with each donation made. In addition it handles many different ways of donating including gifts in memory of a loved one and gift cards to friends who can then choose their charity.

It collects inspiring charity and donor stories in its' blog Giving Life

I spoke with the Executive Director of a charity I support and told her that I had made my annual donation to her charity via Canada Helps.

She thanked me and said that she prefers if donors use CanadaHelps for their donations despite the fact that it retains 3% of the donation as it costs her organization more in administration fees to receive the donation, deposit it and issue a tax receipt. Here’s the web site  CanadaHelps.org