As the Holiday Season approaches, you may find yourself thinking more-and-more about giving to those in need. Dreaming of making a difference for your favourite cause(s) isn’t uncommon. What is uncommon is committing the time, energy and resources to make that difference.

Fortunately, you don’t need a surname like “Richardson” or “Asper” to make your charitable gifts go further. All you need is a little planning, done right:

Bank Your Receipts

If you’ve donated to charities in the past, you may already be familiar with the Charitable Tax Credit. The credit is CRA’s way of lessening the financial burden of donating money. This credit isn’t perfectly linear, creating a planning opportunity to maximize the tax relief.

In Manitoba, the combined federal and provincial tax credit is 25.8% on the first $200 donated in a calendar year. All amounts above $200 earn a combined 46.4%! You can also carry forward unclaimed charitable contributions up to five years.

The smart planning strategy? Consider hanging on to your charitable donation receipts and claim them in a single, bulk year rather than spread out over time. This will put more of your donations into the 46.4% credit range and reduce your out-of-pocket cost for making charitable gifts!

Gift Appreciated Assets

A unique tax planning opportunity exists in Canada for donating assets (real estate, property, stocks, mutual funds, etc…) to registered charities in kind. You can donate non-registered assets without selling them and triggering capital gains, creating a tax-free rollover with a tax credit boost!

For example, imagine John bought an investment for $1,000, many years ago. That investment is now worth $5,000 and John would have a $4,000 capital gain for cashing it in. If John is in a 50% tax bracket, he would pay 50% income tax on half of the capital gain. This sale costs him $1,000 of income tax and nets him $4,000 cash for donating to charity. Instead, if John gifts his securities to the charity in kind, the charity winds up with a $5,000 asset and John gets his charitable tax credit on a larger dollar amount! That’s an immediate 25% enhancement for both John and his favourite charity!

Look At Life Insurance

Most people think of life insurance as a risk-mitigation tool for protecting against premature death. What is often underappreciated about life insurance is the unique way it can be used for leaving a charitable legacy!

If you own or buy a permanent life insurance plan, you’ve guaranteed a particular estate benefit when you pass away. Ideally one that far exceeds the premiums paid. Depending on how you structure the policy (speak to your financial advisor), you can receive your charitable tax credits for the premiums paid, the cash value in the policy, or for the estate benefit.

Imagine someone who knows they’ll have a large final tax bill when they pass away. Rather than reserve money to pay CRA, they purchase a life insurance policy that pays a significant benefit to their favourite charity. Enough of a benefit that the tax credit offsets that tax bill! This strategy is suddenly an enormous win-win for both your personal cause and for your heirs, at the expense of CRA.

Create A Family Foundation

If you have money to burn, you could start a family trust for donating to charity. If you’re a little more fiscally conscientious, you could establish a donor-advised fund. A donor-advised fund is very similar to the large philanthropic trusts of the wealthy, but without exorbitant setup fees or ongoing legal bills.

For as little as $25,000 invested you can create your own donor-advised fund in your family’s name. You get to pick your registered charity that it supports. You get to anoint a successor to manage the donations when you’re gone. You get control over your charitable legacy!

Donating to a great cause doesn’t have to break the bank. By planning out your giving ahead-of-time, you can stretch your dollars further and make a significant impact in the lives of those who need it most!

Happy Holidays to you and you and your family!