Charitable Remainder Trusts
With this type of planned gift, a donor creates a trust funded with securities, real estate, or cash; making an irrevocable gift of the remainder interest to the parish. The donor retains the income for the rest of their lives, or for a guaranteed number of years. At no time can the principal of the trust be decreased.
This type of arrangement offers the donor a number of benefits:
1) A charitable donation tax receipt for the present value of the remainder trust.
2) If the donor chooses they are free of any management responsibly for the Trust
3) The gift is not subject to probate.
Gift annuities are contracts that are set up to provide income to the donor for either a fixed period of time, or for the rest of that person’s life. At the end of the annuity, there is some money left over for the charity. This option may appeal to donors who have accumulated an great deal of capital, which they would like to donate, but need the annual income the capital generates. Once an annuity is set up, the donor receives an annual income which is almost all tax free.
We recommend donors consult with their financial advisors before donating an annuity, as gifts of this type or irrevocable.
Life Insurance is commonly used to provide security for family and business. A gift by way of life insurance can be a very attractive method of charitable giving. This type of gift is powerful because small annual instalments by donors, will translate into a substantial gift for the future. Other advantages to donating through life insurance include: the fact that the donor’s estate is not affected by a donation, and the gift is not diminished due to taxes, probate or administration fees. There are two ways to donate using life insurance:
1) Transfer ownership of an existing policy and designating the parish as the policy’s beneficiary. In this case we would issue a charitable receipt for the policy’s cash surrender value, and any accumulated dividends and interest. If, after giving the policy, the donor choses to keep it in force, any additional premiums paid are treated as gifts and will receive chartable receipts.
2) Purchase a new policy and designate the parish as its owner and beneficiary. Income tax receipts will be issued for the full amount of the premiums made.
A gift of life insurance, as with many planned gifts, can be designated by the donor for a specific use, or it can be categorized as “Unrestricted.” It is also given in the donor’s own memory, or in the memory of someone they wish to honor.
Publically Traded Securities
It is possible, and may be advantageous tax wise, to donate appreciated securities directly to the parish. This includes: shares, bonds, warrants and futures that are traded on Canadian and most other stock exchanges. For gifts of publically traded securities, which have appreciated in value, the amount of the tax saving is dependent on the size of the capital gain…the larger the gain, the greater the tax saving will be. The donor must still report the capital gain on their Income Tax Return. However, the tax credit they receive for the gift essentially shelters the gain from Income Tax.
Donors may choose to elect a value for their gift of any amount between the fair market value and the cost base. This allows them to limit, or eliminate the capital gain on which the tax is payable. A receipt will them be issued for the elected amount.
Donation receipts for gifts of securities are issued for the fair market value, which is defined by Revenue Canada as the closing price on the day the gift was made.
Real Estate is often overlooked as a charitable gift, yet land or buildings, whether commercial or private are excellent charitable gifts. Real Estate gifts are frequently large and potentially very beneficial. We do accept gifts of real estate, after they are carefully investigated for any possible problems.
Often the most difficult part of handling a gift of real estate is establishing the fair market value. A charitable receipt can be issued when the determined value of the donated property is assessed. For large gifts, two or more appraisals may be warranted.
NOTE: Unless the property is useable it would be sold and the proceeds used for the purpose designated by the donor. Ordinarily, we would not retain real estate for investment purposes, since we do not have the resources to manage the property.
If donor’s have assists that they would consider giving, but they may want to maintain control over them, or need the income they generate, or wishes to retain the use of them for their lifetime, a trust arrangement may provide a solution. Many donors wish to retain a lifetime interest for themselves, or a close relative, in their financial assets or property. By establishing a Charitable Remainder Trust, the gift can be structured so the donor is able to use the assets or property and receive a tax receipt while simultaneously providing the parish with a substantial gift upon the donor’s death. Upon death, the earnings from the trust’s assets or the entrusted capital will be used as designated by the donor.