Guest post: Giving as a Plan

Charitable giving has become a part of being Canadian.  Whether it is children selling chocolates door-to-door, the Christmas kettle at the local mall or sponsoring a participant at an annual event, we all do it.  It is so ingrained in our culture that it is rewarded by the Canadian government. Every year we collect our donation receipts and claim them as a tax credit. However, most Canadians don’t consider it as part of their overall financial plan.  They give money straight from their wallet not knowing that there are other strategies that may be more advantageous to them and their financial situation.  

 If you are gifting to charity already, why not gift investments to the charity instead of giving them a cheque? This frees up cashflow while giving charities the money they need for their philanthropic work.

 Most registered charities accept investments as donations. Investments such as stocks, bonds and mutual funds can be donated much like cash. This strategy is particularly advantageous for non-registered assets – assets held outside of a RRSP or TFSA. As assets grow in a non-registered account taxable capital gains build, creating a future tax bill. By transferring the asset to a charity, you avoid this tax bill while receiving a tax receipt.

Another strategy is to setup a charitable foundation. Investments are donated to the foundation, which also avoids capital gains tax and triggers a charitable receipt.  But now you have control over the foundation. You control how the foundation invests the money and how much money is distributed to your charities of choice. It also allows you to change your charitable goals if your values change. When considering this strategy, you should consider that foundations can be expensive to set up and maintain; however, there are some alternative ways that can help mitigate this issue.

Lastly, there are organizations like Abundance Canada that will accept lump sums donations of investments and distribute it to a list of charities that you provide usually over a period of one or two years. In these cases, the organization makes all the investment choices while the money is in their hands – usually it is held in more conservative investments.

No matter what strategy works for you, charitable giving should be considered as part of your overall financial plan. To learn more about these strategies contact us at KLT Wealth Management.

Courtney Beach, QAFP

KLT Wealth Management is the sponsor of the Run for Relief: Run it your way. Register for the run here and meet members of the KLT Wealth Management team on May 28th at the Run for Relief tent.