There is a Planned Gift Vehicle to Suit Everyone
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.
| Kay Gift of cash to offset pension payment | Bea Inheritance from parents | Gary 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 her | Proceeds: $10,000 Cost: $2,000 Gains: $8,000 $2,000 tax on income inclusion of $4,000 |
| Amount of tax savings if gift made | Charitable tax credit on $10,000 gift is $5,000 | Charitable tax credit on $10,000 gift is $5,000 | Zero tax on capital gains means $2,000 savings Charitable tax credit on $10,000 gift is $5,000 Total: $7,000 |
| Net cost of gift | Total 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 gifts | Donor 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%.
