This is the first article in a two-part series on charitable giving. Read Part II here.
Over the last number of years, my interactions with clients have shown a clear and undeniable trend: today’s investor is moving away from the conventional separation of wealth creation and personal values, and more towards the complete integration of socially conscious priorities into the holistic wealth planning process.
On the investment side, this often takes the form of increased interest in socially responsible investment funds, which in recent years have gone from a market niche to a core offering for virtually all asset management firms.
But the most direct way of expressing a commitment to a cherished cause, apart from the gift of your time, is through monetary donations. In this article series, I’ll provide an overview of how you can incorporate charitable giving into an optimally structured wealth plan, and explain how to maximize the benefit of your monetary gifts – both for your charity of choice and yourself.
Different types of donations
There are three main ways to make monetary donations:
Simple, one-off acts of support, such as buying a raffle ticket at a charity golf tournament or supporting a church bake sale.
- Being charitable
Personal engagement with a specific organization that aligns with your values, and making monthly or annual financial gifts to support it.
The option of choice for high-net-worth and ultra-high-net-worth individuals and families. Typically, this involves looking out over a longer time horizon and entails a systematic approach to donating very large sums to one or more causes.
In this article we’ll focus on being charitable; in the next installment of the series we’ll take a closer look at philanthropy.
For most people in the wealth accumulation stage of their financial journey, charitable giving will involve annual donation amounts ranging from hundreds to thousands of dollars, spread out over multiple charities or focused on a single cause.
When you donate to a registered charity you become eligible for tax credits, making charitable giving a win-win for both you and your charity of choice. Let’s look at an example:
This example represents a fairly straightforward case, but our tax rules include a number of other provisions that can enhance your credit amount and add significant flexibility to how you claim your credits. These include:
- An enhanced credit rate of 33% on eligible amounts over $200 for taxpayers who earn more than $200,000 annually.
- The ability to carry forward donation credits to any of the five years subsequent to the year the donation was made.
- The ability to transfer donation credits to your spouse or common-law partner and combine them on a single tax return.
Charitable giving is one of the best ways to meaningfully support causes that engage and inspire our natural impulse to help those less fortunate than we are and join with those dedicated to making our world a better place. Working with your Investment Advisor and accountant can make this immensely satisfying activity financially beneficial for you as well.
John Tabet is Senior Investment Advisor at ViewStone Partners, part of iA Securities. The opinions expressed herein are those of Mr. Tabet alone and may not be aligned with the opinions and values of iA Securities or any of its affiliated companies. This article is a general discussion of certain issues intended as general information only and should not be relied upon as tax or legal advice. Please obtain independent professional advice, in the context of your particular circumstances. iA Securities is a trademark and business name under which Industrial Alliance Securities Inc. operates. Industrial Alliance Securities Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada.