Gift Planning
“Consider your possessions loaned to you by God.”
- St. Catherine of Siena, 14th c.
One thing that sets us as human beings apart from our fellow creatures is the way we consciously control and shape the world around us. We don’t wait for fruit to fall from trees before we eat it: we plant the trees, harvest the fruit, improve the stock to develop better fruit, and develop more productive orchards.
Communities, like orchards, must be nurtured. We have to plant seeds and wait for results. We have to prune and shape. And we naturally want to share with others the fruits of our labours. We want to help family and friends, but often we also want to give part of what we have for the benefit of people we have never met, and those less fortunate than ourselves.
Charity is as old as recorded history, reflecting the human impulse to give to others. There are many ways you can make a charitable gift that reflects your interests, your desire to help others, and your commitment to the work of God through your parish, diocese, or national church.
The government of Canada encourages charitable giving with numerous tax incentives. For more information, we invite you to contact David Irving at the Synod Office (250-762-3306). We also encourage you to consult your own financial and legal advisor for a full discussion of the tax implications of charitable gifts as they apply to your situation.
Outright Gifts
A person who makes outright gifts annually can be compared to a farmer who gives apples each year from the bounty his trees produce. This is the most common type of charitable giving, annual gifts that support current programmes.
A farmer who has been making small gifts of apples for a number of years may find that as his trees have grown, the fruit far exceeds his needs. He can decide to make a larger contribution by giving one or more trees – dedicating the fruit permanently to the charity of his choice. This outright gift of appreciated property has many advantages for the farmer and the charity.
* Outright gifts – either of cash or other property – provide support for a charity’s day-to-day activities, or for special projects and needs. There are many ways of making outright gifts, but they share a common characteristic: as soon as the gift is made, it can be put to use.
* Gifts of cash – are the most familiar way to contribute to charity.
A tax credit is allowed for charitable gifts, which means that the net cost of the gift to the donor will be less than the amount given to the charity. If you make outright gifts, you can deduct a percentage of the value of your accumulated receipts – 16 percent for the first $200 donated and 29 percent for any additional gifts – from the federal income tax you owe. In recent years, all provinces and territories have moved away from the traditional “tax on tax” collection system, adopting what is known as a “tax on net income” ( or “TONI”) system. As part of this new approach, each province and territory has its own tax brackets and its own charitable tax credit system. These credits, when added to the federal credits in respect of the same donations, produce tax relief of the same magnitude as the former system. Married couples may pool charitable donation receipts to take advantage of the higher credit on donations exceeding $200.
To illustrate: A donor whose combined federal and provincial tax credits equal 45 percent, and who makes a $5,000 charitable gift, would realize a tax savings of $2,250, so the actual cost of the gift to the donor would be only $2,750.
The amount an individual may claim in charitable donations for any one year is limited to 75 percent of his or her net income for that year, but the excess may be carried forward for up to five years. The 75 percent limit now applies to all gifts, whether to registered charities or to the Crown.
For more information about outright gifts, please click here.
Giving Appreciated Property
Your gift of listed securities means even more now!
Now gifts of securities will generate a donation receipt for the full value at the close of business on the day of the transaction … with no more worries about capital gains!
To illustrate: Michael makes a donation of listed securities valued at $120,000. He first purchased the securities when the price was $20,000, so there is a capital gain of $100,000. There is no taxable capital gain upon the disposition of the securities. Therefore, Michael receives a donation receipt for the full value of $120,000. Assuming a top marginal tax rate of 50 percent, this would result in a tax credit of $50,000.
Offering gifts of listed securities would go a long way towards providing wonderful and generous support for the many programmes, ministries and projects of the Church.
Future Gifts
A farmer who needs all the apples from his orchard during his lifetime may nevertheless promise the trees – and their fruit – to charity after his death. He might make a testamentary gift, naming a charity in his will to receive either all or a portion of his orchard.
Many people who would like to make a substantial gift to charity cannot afford to part with assets during their lifetimes. Drawing up a will and directing a portion of one’s estate to charity is the most common type of future gift, but it is not the only way to give. Life insurance or retirement assets also can provide a future gift. A common characteristic of such gifts is that they are revocable: these future gift provisions can be changed at any time, should your circumstances require it.
Giving through your Will
It is estimated that only three in ten Canadians have a will, due to oversight, delay – or perhaps an extraordinary confidence in the government’s ability to deal with individual property! If you are among the many Canadians who leave no specific testamentary instructions, your lifetime accumulation of wealth will be distributed according to provincial aw, which may not be the way you would have apportioned it. And if you have no heirs, the provincial government will receive your property as part of its general revenues.
Making a will need not be complicated, and it should be done with proper legal assistance. Providing for a gift to your church or favourite charity in your will can be easily accomplished.
In addition to choosing the form of a bequest, you also have choices as to the purpose for which your gift will be used. Most bequests to the church or charity are unrestricted, supporting the general purpose of the charity, but you may choose to make a restricted bequest directed to support a particular program, ministry or service.
If you are planning a bequest, it is important to confer in advance with a representative of any charity included in your will to be sure that your wishes can be met and that your bequest provision is properly worded.
For more information about wills, please click here.
Tax Implications of a Charitable Bequest
When you make a bequest to the church or charity, your estate is entitled to a gift receipt for the full value of the bequest. This can reduce significantly the tax payable when your final income tax return is filed.
Many individuals find peace of mind and satisfaction in knowing that they have provided not only for their immediate families but also for the charitable organizations that enriched their lives and those of others.
Life Insurance
There are several ways to make a future gift to charity through life insurance, and all provide a significant future gift at a modest present cost to you. You can contribute a policy you already own but no longer need, or purchase a new one as your gift.
Transferring Ownership
If you have a life insurance policy that exceeds your current needs – for example, if your children are grown and you no longer need to provide for their financial security – you can make a future gift by naming a charity as the beneficiary of that policy. If you make the charity both the owner and beneficiary of the policy, you will be entitled to a charitable donation receipt for its value (normally the cash surrender value). Any premiums you pay after you assign ownership of the policy to the charity are eligible for a charitable donation receipt. The premiums can be paid directly to the insurance company or by gift to the charity, which in turn will pay the premium.
Similar benefits apply to a new insurance policy: if you make the charity the owner, each premium you pay (directly or via gifts to the charity) entitles you to a charitable donation receipt. (If you stop paying premiums, the charity may continue them or elect a paid-up policy for a reduced amount.)
Replacing Donated Assets
Life insurance can help you make a truly generous gift at an affordable cost. As with all charitable gifts, if you are considering using life insurance in your gift and estate planning you should consult your financial or legal advisor as to which option is appropriate for your situation.
For more information about life insurance, please click here.
Gifts that Give Back
Some gift arrangements can be compared to a farmer who gives his orchard to a charity while keeping the fruit during his lifetime. He may choose to receive a certain umber of apples each year (a gift annuity) or to keep as many – or as few –apples as the trees produce (a charitable remainder trust).
Gifts that provide lifetime income to the donor are a type of future gift, but with a very important difference. Unlike bequests – which are revocable gifts that allow the donor to change his or her future provision – annuities, trusts, and other life income gifts require an irrevocable transfer of assets from the donor to the charity. These irrevocable gifts provide immediate tax benefits, although the donation receipt is not as large as for outright gifts.
Charitable Remainder Trusts
A charitable remainder trust is a deferred giving arrangement under which a donor transfers property (cash, securities, or real estate) to a trustee. The donor (and/or other beneficiaries) retains the right to the income from the trust either for life or a specified term of years. The Church receives whatever remains in the trust after that specified term, or after the death of the last beneficiary, whichever has been agreed to in the trust document.
Donors who establish a charitable remainder trust receive a charitable donation receipt for the present value of the future gift (the “charitable remainder”), which the Church will receive when the trust terminates. That value is calculated based on actuarial tables, taking into account the value of the property transferred to the trust, interest rates, the age(s) of each beneficiary, or the term of the trust if it is for a specific number of years.
Charitable trusts can have many advantages in addition to providing you and/or others with income – including freeing you from the responsibility of managing the asset(s) you contribute, saving probate fees, and protecting privacy.
For more information about charitable remainder trusts, please click here.
Gifts of Residual Interest
Suppose the farmer had built his home in the middle of the orchard, and wanted to continue living in it and managing the orchard during his lifetime. He could donate the orchard, and his home, but retain the right to occupy it.
A gift of residual interest allows the donor to make a gift of real estate, get a donation receipt, and retain the use of that property during his lifetime. That is, you may donate your residence but continue to live there. You receive a donation receipt for the present value of the “residual interest” you give – irrevocably – to the Church. However, you remain responsible for maintaining the property that ultimately will go to the Church.
There are many benefits to the donor and the Church under this arrangement. The tax benefits include a donation receipt for the present value of the “residual interest” – the value, in today’s dollars, of the property the Church will eventually receive. This is based on the market value of the property, current interest rates, and the life expectancy of those retaining a life interest in the property.
For more information about gifts of residual interest, please click here.
Conclusion
There are many ways that gifts can be made to benefit the Church. For more information, please contact David Irving at 250-762-3306. If, like the farmer in the orchard, your labours in life have provided a bountiful harvest, you can experience pride and satisfaction by sharing with others. With careful planning, you have the opportunity to make a generous gift to the Church and do yourself a favour at the same time.
For more information, select the following links:
Please contact Archdeacon David Irving
at 250-762-3306 or archdcnkootenay@telus.net for more
Stewardship & Planned Giving information.