Whether it’s a small donation or a large bequest, a gift to a charity or non-profit foundation can make a significant difference in how effectively these organizations achieve their social goals.
If you’re considering a gift to a favourite cause, be sure you understand all the implications, especially if you plan to make a donation of significant value.
“How you give goes a long way to maximizing value for you and your charitable or non-profit organization,” says Scott Evans, financial advisor at Vancouver-based BlueShore Financial. “It’s important to make these decisions with the broader picture in mind since how much is given can impact lifestyle, tax and estate planning, and family legacies.”
Consider the following giving suggestions from Mr. Evans and Ian Fraser, a legacy advisor and charitable estate planner in Kingston, Ont.
Give towards what’s meaningful to you. A donation is most rewarding when it supports a cause that’s aligned with the values of the donor.
“We encourage donors to consider the various areas of life that are important to them,” says Mr. Fraser, whose company, PhilanthroPlan, offers a planned giving calculator and proposal software for donors, charities and advisers. “Think about how your gift can advance something that you’re passionate about.”
Consider how your gift will affect your family. Charitable acts have a personal and financial impact on a donor’s lifestyle, tax and estate plan, as well as on family legacy. It’s important to make these decisions with the broader picture in mind, says Mr. Evans at BlueShore Financial.
“Use family gatherings to express which causes will be supported and why,” he says. “These gatherings can also be used as a way to align multigenerational interests together if the discussion centres around how a charitable gift reflects family values.”
Understand how it fits into your overall financial plan. Like any part of a financial plan, a donation strategy has to be flexible to adapt to changing life circumstances and desires.
“We advise making savings an automatic monthly habit, and you can do the same with charitable donations,” says Mr. Evans. “Many of our clients find it easy and convenient to set up a monthly contribution to their preferred charities.”
Take advantage of tax saving opportunities. The steady rise in stock markets in the U.S. and Canada over the past 10 years means that many investors hold shares that have increased significantly in value. Selling these shares would result in a tax liability equal to half of the increase. Donors who transfer shares to a charity do not have to pay capital gains tax on the increased value of their investments. And, they will receive from the charity a tax receipt equal to the value of the shares on the date of the transfer.