Ways to Give
A cash donation to a registered charity will provide you with a tax receipt that you can use to reduce your taxable income. Charities may have a minimum donation amount to qualify for a receipt.
Donation of Life Insurance
When donating your life insurance policy to a charity there are three options:
You can purchase a new life insurance policy and name the charity as the owner and beneficiary. Any annual or monthly premiums you pay are considered donations. You will receive a charitable tax receipt for the cash value of the policy and for any premiums you pay.
You can keep ownership of the life insurance policy, and name the charity as the beneficiary. At the time of your death the charity receives the policy proceeds and your estate receives the tax benefits.
You can donate an existing policy that you no longer need and receive a charitable tax receipt for the cash value of the policy. You will have to keep paying annual premiums that are still owed, but you’ll receive tax receipts for those payments as well.
An endowment fund is a donation of funds to a charity, which then uses the investment income for a specific purpose. They are designed to keep the principal amount intact while using only the investment income for charitable efforts. Charities may have minimum funding levels for endowment funds.
Gift of Real Estate
With the gift of real estate comes a tax deduction equal to the appraised market value of the property, with no capital gains tax due on transfer. The chosen beneficiary can then choose to sell the real estate or keep it for its own use. If you wish your real estate to be used in a specific way you must make this clear prior to the donation.
A gift of personal property will give you a charitable deduction for the item’s fair market value with no capital gains liability. The item must be professionally appraised. The charity can keep, display, or sell the gift. If you have a preference as to how it should be used, that should be communicated with the charity beforehand.
Gift Annuity (CGA)
With a gift annuity you will transfer an irrevocable gift of cash or securities in exchange for a fixed income payment for life. This gift plan entitles you to an immediate charitable income tax deduction. At the end of its term the balance goes to the chosen charity.
Pooled Income Fund (PIF)
Your gift will be pooled with gifts from other donors, and then invested to pay each donor a quarterly income calculated from their share of the fund. As each participant passes away the charity receives a gift in the amount of that donor’s share of the fund.
Charitable Lead Trust
A charitable lead trust is an irrevocable trust that provides financial support to one or more charities for a period of time, with the remaining assets going to family members or other beneficiaries at the death of the donor. This is often considered as the inverse of a charitable remainder trust.
Charitable Remainder Trusts
A charitable remainder trust is an irrevocable trust that uses capital to create the trust, with the income earned on the capital being paid out to the income beneficiaries. When the donor passes away and the trust ends, the capital is donated to the remainder beneficiary (the charity). The donor will receive immediate tax benefits, using a tax receipt to offset taxable income.
A bargain sale is when you sell property to a charity for less than the market value and receive a charitable tax deduction equal to the difference between the market value and the sale price. This can sometimes be more financially advantageous to the donor (you)!
RRSPs and RRIFs
You are able to designate a charity as the beneficiary of your RRSPs or RRIFs, and you will be eligible for a tax receipt that can be used to offset taxes on registered funds. You can also gift your RRSPs or RRIFs through your will, which means the funds will flow directly from your financial institution to the charity without the need to pass through probate.
Gift of Securities
When you donate appreciated securities directly to a charity the capital gains tax is eliminated on the investment. You can also choose to donate stocks directly through your will. Note: Ensure that the shares or mutual funds you want to donate qualify for the tax incentive (cannot be a RRSP, RRIF, or TFSA).
Residual bequest: All outright bequests are fulfilled first and anything that remains in the estate will be donated through the residual bequest.
Outright bequest: An outright bequest is a direct bequest for a specific amount or portion of your estate.
Endowed bequest: An outright or residual bequest is used to establish a permanent endowment in you or your family’s name. Charities may have minimum funding levels for endowed bequests.
Contingent Bequest: A contingent bequest is a gift in a will made on the condition that the primary beneficiary or beneficiaries of the bequest predecease you. If the condition is met, the charity becomes the beneficiary.
Residual Interest in Property
Donating residual interest in a property is ideal for folks who would like to donate a gift of property and receive the tax benefits immediately, while using the property for the remainder of their life. For a principal residence, the donor pays no tax on the gain, for other properties 50% is taxed on any gain. If you wish to relinquish the property before death your options are:
Donate the remaining life interest to charity
Rent the property and retain the net rental income
Sell the property and divide the proceeds based on residual and life interest values at the time of the sale.
Planned Giving FAQ's
Q: What is the advantage of informing the beneficiary organization of my planned gift, when it will not benefit them for years to come?
A: Notifying the participating charitable organization of a future source of income allows them to make more informed financial decisions in the present and to plan for the future.
Q: How do I determine the value of artwork and collectibles that I want to donate?
A: All artwork and collectibles must be independently appraised, and you will receive a charitable deduction for the items’ fair market value.
Q: Do I have to donate to a registered charity?
A: In Canada, your chosen beneficiary must be a Canadian registered charity or other qualified donee. A list of CRA approved charities can be found here.
Q: How do I avoid fraud when donating?
A: To see the CRA’s tips for donating wisely and warning signs of fraud click here. If you would like to report charity fraud, call the Canadian Anti-Fraud Centre at 1-888-495-8501.
Q: What’s the difference between a charity and a non-profit organization?
A: You can see a full list of differences here, however the most notable difference is that charities must be established and operate exclusively for charitable purposes. A non-profit organization can operate for social welfare, civic improvement, pleasure, sport, etc. Non-profit organizations are not registered with the CRA.
Q: Can I leave a legacy gift without significantly diminishing my children’s inheritance?
A: This myth in planned giving stems from the scarcity mindset. Many folks think that if they leave money to a charity, there won’t be enough money for their dependents. Colleen Bradley, the owner of Planned Giving Solutions Inc. explains;
“People think that leaving money to a charity will diminish what they can leave to their kids. But because of Canada’s tax regulations, you can give money to a charity that you would otherwise give to the Canada Revenue Agency in taxes. And if your net income in the year of your death is lower than the amount you give, your executor can claim a rebate against your previous year’s income and add that to your estate” (“Planned Giving” – Straight Answers for Regular Folks).
Q: What happens if the charity I chose is no longer registered?
A: If the organization was registered when you made the donation, you can still use your receipt to claim a tax credit.
Q: How do I choose the right charity?
A: There’s a few questions to ask yourself when deciding on a charity to donate to. What are you passionate about? Where would you like to see change? What organization has shown they have the ability to make that change?