Charitable Giving Strategies
If it is better to give that receive, surely it must be even better to give more efficiently. Unfortunately, many are not aware of strategies that allow them to give more effectively. Once you’ve determined the causes you want to support, we can work with you to do it properly. It could be a simple as encouraging you to donated appreciated securities, or we can set up family foundations. We’ll work with you to determine the right solution
Becoming a better donor directs more of your assets to causes that are important to you and less to the government in the form of taxation.
IN CELEBRATION OF GIVING
In September 2022, I had the opportunity to sit with a remarkable group of people. Collectively, they came together to raise over $30,000 to support a worthy cause in their local community. I’m always inspired when I see what motivated and passionate people are able to accomplish!
While $30,000 is nothing to sneeze at, I couldn’t help but wonder if it could have been more. (Hint: It could have.) That’s because virtually all of the money raised came from individuals and businesses who believed in the cause and donated cash by writing cheques.
Giving cash is quick and convenient. It also happens to be the least efficient way to give. If donors want to maximize the value of their generosity, learning how to “give better” is a great place to start.
WHAT’S IMPORTANT TO YOU
Determining which charity to support can be a daunting task. That’s because there are over 87,000 registered charities in Canada alone. The landscape is crowded. Many Canadians will support organizations with whom they have a personal connection or relationship. Whom you choose to support is your decision, but if you don’t have a group in mind, how do you decide?
Ask yourself what kind of impact you want to have on your community.
Identify the areas that are important to you. Are you interested in supporting the arts? Health services? The environment?
Determine if you are interested in supporting international, national or regional charitable organizations.
Conduct primary research. The internet, your personal and professional networks and even calling charities directly are great ways to learn more about their unique goals and objectives.
Are you in a position to “give now”, or are you thinking of legacy gifts through your estate?
Once you’ve narrowed down your list, you can begin working on strategies to maximize the value of your gift.
A PRIMER: CHARITABLE DONATION TAX CREDIT
In Canada, whether for an individual or a corporation, eligible amounts that are donated to charity can be used to calculate a charitable tax credit. In simple terms, make a donation, get a receipt, get a tax credit from the government. In fact, donating to support charitable causes is one of the most effective ways Canadians can reduce their overall tax bill.
Because the charitable donation receipt rates vary based on annual income and the province or territory of residence, doing the math can be complicated. Fortunately, Raymond James Canada Foundation has an online tool that makes the calculations simple. Using the tool, you simply enter your annual income, where you live, and the amount you’d like to donate. The calculator does the rest.
For example, Harry lives in Nova Scotia and earns $102,000 per year at his corporate job. Inspired to support a worthy cause, he writes a cheque for $1,000 to a registered charity. When filing his annual taxes, he will find a $448 tax credit as a result of his donation. The actual cost of the donation is $1,000 - $448 = $552.
Simple, right?
DONATION OF APPRECIATED SECURITIES
Sarah also lives and works in Nova Scotia, earning $102,000 per year. Even though she has money in her bank account to write a cheque to the charity, she decides to discuss the donation with her portfolio manager and accountant. After reviewing her non-registered investment portfolio, she discovers that she has investments that have appreciated in value since they were purchased five years ago. In fact, one $500 investment is now worth $1,000.
If Sarah sold her investment and donated the proceeds to charity, she would trigger a capital gain (the difference between what she sold it for and what she paid for it: $1000 - $500 = $500). She would have to declare the capital gain on her annual income tax. In this case, her gain would generate an additional $250 in taxable income.
Fortunately, Sarah does not have to sell the investment. She can donate her $1,000 investment to the charity directly. The charity will get $1,000, Sarah will get the receipt for the full amount of the donation, and she will have *eliminated* a capital gain liability from inside her portfolio. She will not have to pay tax on the $500 capital gain because she never sold the investment.
Her donation still qualifies her for the same $448 tax credit that Harry received, but her financial situation improves because she avoided paying tax on a capital gain. She can immediately use the $1,000 in cash from her bank account to repurchase the securities she donated.
GET GOOD AT GIVING
Donations of appreciated securities are just one example how Canadians can give better. Donors should work directly with their portfolio managers and tax accountants to explore the implications of different types of donations. Maximizing the tax advantages of a chosen giving strategy can often inspire people to give more to support causes that are important to them, since the greater the tax advantage, the lower their actual cost of giving will be.
It’s possible – even probable – that with a bit of education, the group who raised $30,000 could have raised even more. Getting good at giving begins with learning and understanding how to maximize the value for the donor and for the charity receiving the gift. That's something worth celebrating.
The opinions expressed are those of Craig Swistun and not necessarily those of Raymond James Investment Counsel which is a subsidiary of Raymond James Ltd. Statistics and factual data and other information presented are from sources believed to be reliable but their accuracy cannot be guaranteed. It is furnished on the basis and understanding that Raymond James is to be under no liability whatsoever in respect thereof. It is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. Raymond James advisors are not tax advisors and we recommend that clients seek independent advice from a professional advisor on tax-related matters.
Estate Planning
An estate plan aids in the transition of assets to the next generation, potentially preserving family harmony and avoiding excess taxation.
An estate plan aids in the transition of assets to the next generation, potentially preserving family harmony and avoiding excess taxation.
THE CRYSTAL DECANTER
Before my grandmother died almost two decades ago, she created a rudimentary estate plan and documented her wishes in a will. When her estate was being settled, the executor made certain to ensure that specific items intended for her children and grandchildren were disbursed appropriately. I received a crystal wine decanter and a share of the family cottage where we enjoyed many summers growing up.
A common mistake many make is believing that estate planning is just for wealthy clients. It isn't. It ensures the seamless transition--financially and emotionally--of assets to the next generation.
Joint-ownership of vacation property can be problematic, especially when people live in different cities or provinces. We were fortunate to preserve family harmony, as new owners we agreed to sell the property and split the proceeds. It worked, but could there have been a better approach?
BEYOND THE WILL
The cornerstone of any estate plan is the will. Whether a baby boomer, millennial or member of Generation Z, having an up-to-date will is important. A will is an expression of an individual’s personal desires, outlining how they would like their affairs managed once they are gone.
“If someone dies without a will, they are said to have died “intestate”. This means that there are no instructions as to how assets and property are to be divided and distributed. Essentially, the government gets to decide what happens to any property left in the estate. ”
A smooth and effective transition of assets to the next generation can play a role in preserving family harmony. What if two people have sentimental attachment to an antique crystal decanter?
THE ESTATE PLAN
A will can’t be created before addressing some fundamental questions. Fortunately, answers can be captured in a conversation dedicated to putting together an estate plan. Who will act as your executor? Do you require a professional? If you have minor children, who will be responsible for their upbringing? What happens to any bank accounts, investment accounts or debts and obligations?
While there are no inheritance taxes in Canada, there are estate taxes. In the year of death, all assets are deemed to have been sold, effectively crystalizing capital gains on assets and property. For those with significant investment holdings, this can result in a large tax bill. Gifting to charities before death, setting up trusts or using the proceeds of life insurance are common strategies to mitigate the tax due on death. Of course, the larger the estate, the more options become available and the more important planning becomes.
Fortunately, much of this work can be done ahead of time, leaving less for the executor or your heirs to manage.
START AT THE BEGINNING
From our perspective, a good estate plan begins by reviewing your personal goals and objectives--what do you want? As a starting point, consider the following questions:
GET PROFESSIONAL ESTATE PLANNING
As the value of your estate grows--investment assets, primary residence, vacation properties and even collectibles and digital assets--it becomes even more important to look at different ways to build a comprehensive estate plan. Estate freezes, family trusts and charitable foundations may provide significant advantages to larger estates, but even smaller estates may benefit from proper planning.
We recommend that all clients--regardless of estate size and investment sophistication--consult with a seasoned and trained professional who has considerable expertise in estate. If you are not currently working with such a professional, we can introduce you to our colleagues at Raymond James Financial Planning who are experts in this type of work.
JUST PLAN
Once a plan has been created, it should be reviewed regularly as your financial situation may change over time. Your named executor may no longer be able to fulfill their obligation, for example. Also, updates to provincial legislation may impact your estate plan.
Nobody likes discussing death and estate planning. A proper estate plan provides comfort that your affairs are being dealt with effectively and efficiently.
The opinions expressed are those of Craig Swistun and not necessarily those of Raymond James Investment Counsel which is a subsidiary of Raymond James Ltd. Statistics and factual data and other information presented are from sources believed to be reliable but their accuracy cannot be guaranteed. It is furnished on the basis and understanding that Raymond James is to be under no liability whatsoever in respect thereof. It is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. Raymond James advisors are not tax advisors and we recommend that clients seek independent advice from a professional advisor on tax-related matters.
Retirement Planning
Planning for retirement isn’t just looking at financial projections and estimates of future wealth. While projections are important, they aren’t nearly as important as determining the type of retirement you want and how your investment assets can help you achieve those goals. We can’t help build an investment strategy without knowing what that overall plan for retirement might be. Contact us to see how we can help.
People are living longer, healthier lives.
Retirement plans shouldn’t be about retiring.
They should be about living.
A RETIREMENT PLAN IS NOT A FINANCIAL PLAN
A financial plan takes a detailed look at a personal or family situation with respect to money and finances. It assesses both the wealth accumulation (saving and investing) and the decumulation phase (spending to support lifestyle), and through a series of projections generates a range of potential outcomes. These outcomes are intended to help answer questions like, "How much I can I afford to spend in retirement?" or "When will I be able to successfully retire?"
By itself, a financial plan is just a series of projections and numbers without context. It's your individual goals that bring things into sharper focus. What do you want to spend your money on? How do you envision your retirement? Evaluating your ability to achieve those goals is a big part of a comprehensive retirement plan.
Financial plans coupled with a retirement plan based around setting specific goals will include estimating the amount of money you might need and determining the most appropriate strategy to grow or protect your existing investment assets.
These days, retirement is so much more than simply "not working". People are living longer, creating demands for planning that lasts 10, 20 or even 30 years. Understanding goals and objectives is an important part to making sure people plan for and lead fulfilling retirements. Remember the old chestnut, "People don't plan to fail, they fail to plan.”? If you don't know where you are going, how do you expect to get there?
We believe that retirement planning begins at goal setting. Once goals have been determined, they are integrated with your financial information to create a financial plan. Then an investment strategy is developed and presented to you in a written and easy-to-read Investment Policy Statement, an important document that outlines the recommended portfolio strategy.
No plan is ever complete. Each step is reviewed on a regular basis, ensuring all aspects are working towards achieving your goals and objectives.
SETTING “SMART” GOALS
Goals that are S.M.A.R.T. (i.e., Specific, Measurable, Actionable, Realistic, Timely) have a higher chance of being achieved, but allow yourself to dream a little. Don't limit yourself at this stage. The financial planning process is when goals can be tested against financial assets to determine their reasonableness.
To help you get started, we've created work sheets that guide you through this process. As well, we've included sample answers to the same questions, so you can see the level of depth and detail that goes into creating a workable plan.
The exercise isn't complicated, but that doesn't mean it is easy. It forces you to think—without worrying about money for the moment—about the type of life you want to live in retirement. There are no wrong answers. If you have a spouse, we strongly recommend that you complete the information separately, which reduces or eliminates pressure to answer questions the same way. Often, we find that one spouse defers to the other spouse and does not think critically about the questions below.
What are you looking forward to in retirement?
Is there anything about retirement that causes you stress or anxiety?
What will you miss when you retire?
Do you intend on working part-time? Volunteering?
What short-term goals (less than five years) would you like to accomplish?
What long-term goals (more than five years) would you like to accomplish?
Is there anything you have been putting off that you really want to do?
Describe your perfect day.
TAKE IT SLOW
Younger people might struggle with this, but I recommend you take time to write things down. If you want to go old school and use a pencil and paper, go for it! Don't worry about structure or grammar. What's important is your thoughts are captured. Also, don't worry about finishing it in one sitting. Take as much time as you need.
Many find it helpful to work with a professional to help guide them. For more complex planning needs, we will work closely with someone in your network, or we can introduce one of our highly trained professionals from our affiliate Raymond James Financial Planning. Working together, we can show how your retirement plans and financial plans come together, customizing an investment solution that is right for you and your family.
The opinions expressed are those of Craig Swistun and not necessarily those of Raymond James Investment Counsel which is a subsidiary of Raymond James Ltd. Statistics and factual data and other information presented are from sources believed to be reliable but their accuracy cannot be guaranteed. It is furnished on the basis and understanding that Raymond James is to be under no liability whatsoever in respect thereof. It is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. Raymond James advisors are not tax advisors and we recommend that clients seek independent advice from a professional advisor on tax-related matters.