“Begin with the end in mind!” Wise words from Stephen Covey, and easy to apply to some things. My experience as a financial professional is that it doesn’t apply as easy or as often in the world of philanthropy. The mistakes I see people make with their charitable giving are all too common, despite our best intentions. One of the top mistakes I see Canadians make when donating to charity is making the wrong gift at the wrong time.
When making a gift to charity, either today or through your estate, consideration should be given to the effectiveness and efficiency of the gift. Assuming the recipient organization is worthy of your generosity, you should then ask yourself: How can I make my donation go further and, at the same time, maximize the tax benefits?
When deciding to give, it is important to review all your assets (i.e., cash, securities, insurance policies, real estate, etc.) to determine which will give you the greatest tax “bang for your buck”. As an example, and assuming the highest tax bracket of 47.5%, if you have $10,000 of appreciated securities with an adjusted cost base of $4,000, your tax payable on its sale will be approximately $1,425.
The good news is that our government actually wants you to give. One way it encourages Canadians to do that is through elimination of the tax on appreciated securities if you choose to donate them to a registered charity.
In our example this would save $1,425 of tax. Unfortunately, in my experience, I have found that many Canadians will donate the $10,000 in cash without taking into account the more tax advantageous alternatives open to them. True, they will also receive the same charitable tax credit, but why pay an extra $1,425 in tax needlessly?
Before you give, please carefully review all your assets, or secure the services of a professional advisor with a specialization in philanthropy to determine which of your assets to use in making a donation. And today, with Covid19, there is no better time to do this review then now.
I believe that equipped with good information, perhaps we will make better decisions. I have written a Special Report, “The Top 7 Mistakes Canadians Make When Donating to Charity”, to assist you in ensuring that your giving strategy maximizes its impact and help you avoid these common mistakes. For your free copy, including more information on the Donation Multiplier TM, contact our office at 306-934-5540 or suttonplanning.ca.
First published in the June 18, 2020 edition of the Star Phoenix.
