Planned giving – allocating charitable gifts in a will – is about leaving a legacy for the future. It has an emotional, almost immortal component: the idea that we can continue to live on through our support for a cause that is meaningful to us. But it also has a less altruistic benefit.
“Any type of planned giving has a tax benefit either for today or for your estate,” says Julia Roudakova, a financial planner who is also lead strategist for Leave a Legacy, a program of the Canadian Association of Gift Planners, B.C. chapter.
One of the benefits can be in avoiding capital gains taxes. Donations of securities are a prime example. Not only does this mean avoiding taxes on the sale side, it also results in a tax receipt that reduces overall taxable income .
Another twofold benefit can be gained through designating registered retirement savings plans or registered retirement income funds to charity. The estate avoids paying tax on the money and also receives a charitable tax receipt for the full amount of the plan’s value. Notably, tax credits derived from a bequest can be applied to 100 per cent of the income of a deceased person, compared with 75 per cent while alive.
Life insurance is another way to make an outsized impact, says Roudakova. “If you buy an insurance policy and you transfer the ownership to the charity, the premium you are paying will also qualify for tax benefit,” she says.
Annuities also offer substantial and immediate benefits while doing good in the long term. Depending on the arrangement, a donor can continue to earn interest on the gift during a lifetime, even while receiving a tax credit for the donation.
Planned giving is a crucial source of support for many recipient agencies.
Cheryl Stevens, director of gift and estate planning for the University of British Columbia (UBC), notes that the very first gift the university received was a legacy that helped found the medical school, in 1932. She emphasizes, though, that legacies need not be enormous to have a powerful effect.
“UBC’s been fortunate to receive estate gifts of all sizes that are important to the university and also meaningful to the person who made the gift,” she says.
Even so, some gifts stand out. A $6 million life insurance policy assigned by Jack and Elly Senior to the Vancouver General Hospital and UBC Hospital Foundation is allocated to cardiology. “It’s going to impact things like women’s heart health, cardiovascular oncology … a CT scanner and also the anesthesiology program,” says Charlene Taylor, associate director, gift and estate planning, for the foundation.
A $21.5 million legacy came to the BC Cancer Foundation from the estate of Burnaby businessman John Jambor. The man’s grandson, Bill McCarthy, managed the real estate Jambor bequeathed on his passing nearly 25 years ago, parlaying it into the massive gift that the foundation received three years ago. “It’s been significant because it immediately supports world-class cancer research that’s taking place at the BC Cancer Agency,” says Christine Basque, associate vice-president of development for the BC Cancer Foundation.
As good as the tax benefits may be for the donor, Basque says, the prime motivator for most gifts is the desire to make a positive difference. The tax benefits, she says, are just a bonus.
For more on retirement preparedness, see an infographic at www.biv.com/navigating and read our new Retirement Ready magazine at https://www.biv.com/magazine/retirement-ready-2016/
