Solus Trust Company Limited Article

There is a Planned Gift Vehicle to Suit Everyone

Kristine Love

Kristine Love
Senior Trust Officer
Solus Trust Company Limited

It doesn’t really matter how much wealth you have accumulated in your life. Each of us have different motivations and goals, and goals change over our lifetimes. Consider these donors’ circumstances and desires:

Kay has switched jobs and has elected to transfer her pension plan funds out. She cannot shelter 100% of them, so she stands to pay a significant amount of tax this year.

Bea’s parents have both recently passed away and she has received an inheritance. She feels now she can afford to make larger gifts to her favourite charity, but she feels that she should include the charities that her parents supported.

Gary was enrolled in a share purchase plan at Big Bank where he worked for many years. Retired now, the shares have been moved into a self-directed trading account and continue to increase by the reinvested dividends.

All three have been inspired to give by a presentation from one of their favourite charities. Initially, they don’t think they can give very much; however, their financial advisors show them how to maximize their gifts.

Gift of cash to offset pension payment
Inheritance from parents
Publicly traded securities
Amount of gift$10,000 Cash$10,000 cash to establish a Donor Advised Fund$10,000 fair market value of 200 shares of Big Bank
Tax payable without gift$5,000$5,000$2,000 tax on capital gains of $8,000
Calculation of tax$5,000 tax on income inclusion of $10,000 pension lump sum payment$5,000 tax on income inclusion of $10,000 on the income earned in the estates and allocated to herProceeds: $10,000
Cost: $2,000
Gains: $8,000
$2,000 tax on income inclusion of $4,000
Amount of tax savings if gift madeCharitable tax credit on $10,000 gift is $5,000Charitable tax credit on $10,000 gift is $5,000Zero tax on capital gains means $2,000 savings
Charitable tax credit on $10,000 gift is $5,000
Total: $7,000
Net cost of giftTotal Gift: $10,000
Tax Savings: $5,000
Net Cost: $5,000
Total Gift: $10,000
Tax Savings: $5,000
Net Cost: $5,000
Total Gift: $10,000
Tax Savings: $7,000
Net Cost: $3,000
Future giftsDonor Advised Funds distribute income annually to one or more charities, allowing Bea to support both her charities and her parents’ charities

Assumptions: The tax rate for everyone is 50%. This is not their only charitable gift, so 100% of this gift receives a tax credit of 50%.