Giving is good.
Good for your community, good for your charities, good for those who benefit from your charitable acts and donations. And to make the sharing of your bounty even more appealing, giving can be good for you, too.
Your philanthropic gift is always important, no matter the amount of your assets or the size of your income — but to make the best use of your contributions, to preserve your legacy, and to minimize taxes and/or estate fees, a sound charitable giving plan is the way to go. Let’s look at your options.
Name a charity as a beneficiary
The simplest option. In your will, leave a bequest of money or gift in kind (securities or artwork, for example) to a recognized charity and your estate will receive a charitable donation tax receipt that could reduce or eliminate the income tax on your final return and possibly on the immediately preceding return, as well.
Establish a donor advised fund
As the donor, you receive an immediate tax receipt for all contributions made to the fund and you also retain the rights to select the charities that are to receive your fund’s annual income.
Establish a charitable remainder trust
This is an irrevocable trust that can hold assets such as cash or mutual funds. All the interest and dividends are paid to you as taxable income. Upon your death, the trust assets (known as the remainder) go immediately to the charity you have designated. When the trust is established, you receive a donation receipt for the ‘remainder interest’ of the trust.
Donate a life insurance policy while you live
With this option, you ensure your charity will receive the total death benefit under the policy while you enjoy certain tax credits.
Donate publicly funded stocks or securities
You will pay no capital gains tax on the donated securities and will receive a tax receipt for their full value.
Establish a charitable life annuity
You will continue to receive a lifetime income from the donated assets for yourself, or for you and your spouse. Much of the annuity cash flow is tax free and you’ll receive a charitable receipt for a portion of the donations based on the amount of annuity income you receive and your life expectancy.
Establish a private foundation
If your donation is very substantial, this option allows your name or family’s name to be permanently associated with the causes you’ve chosen.
Ask your professional adviser for help in establishing a planned giving strategy that makes the most of your bounty for your charities and for you.
J. Kevin Dobbelsteyn is a certified financial planner with Investors Group Financial Services Inc. His column appears every Wednesday.