Get more out of giving: The benefits of a philanthropic strategy

By Christine Van Cauwenberghe

Special to Financial Independence Hub

December ignites the spirit of giving and most affluent Canadians are continuing to spread the wealth, despite the current economic climate.

A survey conducted by Pollara Strategic Insights on behalf of IG Private Wealth Management found that 96 per cent of high-net-worth Canadians (those with at least $1 million in investible assets) give to charities, with more than half (57 per cent) stating that the volatile economy will not impact their philanthropic priorities. However, only 26 per cent have a charitable giving strategy.

There’s good reason to give, particularly at year’s end, as many can pair supporting the causes they care about with financial incentives. However, with increased capital comes complexity – it’s important that wealthy Canadians speak with a financial advisor to understand when, and how, to give to maximize the benefits for themselves and the causes they champion.

A carefully constructed giving strategy can enhance tax efficiency and optimize the impact of donations. Below are three key considerations to keep in mind when making a charitable donation:

Tax benefits

Prior to making a gift, it’s helpful to understand the tax benefits associated with your donation. An organization can issue a tax receipt following a donation if it meets the criteria under the Income Tax Act.
A charitable donation claimed personally on your tax return generates non-refundable donation tax credits. The value of these credits reduces the taxes you owe.
When claiming donation tax credits on your tax return, the credit rate you receive and amount of tax savings for each dollar donated will depend on your specific circumstances. The value of the donation tax credit is determined by the amount of donations you wish to claim, your taxable income level, and your province or territory of residence.
If this is a high-income year, it may be beneficial to increase donations in the year to take advantage of the potentially higher donation tax credit rates available to you.

Deciding what to give

Your donation decision should align with your overall financial plan – when deciding on the amount to give, consider your short- and longer-term goals, retirement and estate plan.
When determining the type of asset to donate, cash is often the simplest solution. However, there are alternative asset types you can gift that may boost the tax efficiency of your donation, including but not limited to publicly traded securities.

Timing

You may want to give a portion of your assets to charity when you die or you may wish to donate throughout your lifetime, or both. There are a several factors to consider in deciding when the timing is right for you.
If you donate during your lifetime your chosen charity will receive the funds right away to help fund its charitable objectives, providing an immediate impact. You will benefit from the donation tax credits your gifts generate each year and reduce your taxes payable an ongoing basis.
With a donation at death, you retain control over the assets during your lifetime and decide how these assets are to be distributed at death. Incorporating charitable giving into your estate plan can build a legacy after your death that continues to support the causes important to you.

There are many considerations when deciding to give to charity and a well-constructed strategy can maximize the benefits both for you and the causes you care about. Our IG Advisors can work with you to build a giving strategy that aligns with your philanthropic goals and wider financial plan to help grow your impact – now and in the future.

Christine Van Cauwenberghe is the Head of Financial Planning at IG Wealth Management. She oversees the division’s three teams: the advanced financial planning group, comprising the firm’s 40 tax and estate professionals; IG University, the firm’s advisor training group; and the financial specialist network, a team that will coach advisors of high-net-worth (HNW) clients. Van Cauwenberghe is also a member of the Canadian Tax Foundation, has her CFP designation, is a registered retirement consultant, and is certified by the Society of Trust and Estate Practitioners.