Planned Giving – Dated November 2010
Our government recognizes the value of services provided by Canadian Registered Charities and has provided incentives to taxpayers to support registered charities. Outlined below are a number of gift strategies that will allow your donation dollars to go farther.
Donations to West Park
An official charitable donation receipt is issued for all donations to registered charities. Charitable donation receipts create a personal tax credit at the highest personal tax rate. Accordingly, the after-tax cost of a donation is approximately 59.8%. For every $100 (over $200 aggregate annually) given to West Park, your cost is $59.80 whereas the charity receives the full $100.
Donors interested in preauthorized giving, either monthly or semi-monthly may obtain an application from the Church office in order to set up direct withdrawal from a bank account.
Make a Bequest in your will to West Park
You can achieve an ongoing legacy by making a gift bequest in your will to your favourite registered charities. Gift bequests may be in the form of money or other assets. A charitable donation receipt will be issued and be available to reduce income taxes payable at the time of preparation of your final income tax return. Your executor can claim charitable donations up to 100% of your income in the year you die and the year prior. It is important to know that you may save significant tax and thus enlarge your estate if you properly choose which assets to leave to family and which to leave to charity.
Use a Gift Annuity to secure a guaranteed income for life, much of it tax free
Bill is age 71 and Edith is 70. They have $30,000 in a GIC that is maturing. They would like to receive an income of 6% on a $30,000 Gift Annuity. They can choose between 3% and 7.5%. A gift annuity will give them a yearly income of $1,800 (only $478 of which is taxable) for the rest of their lives. Based on their age and the income they want to receive they will be giving $5,010 to the ministry of West Park immediately for which they will receive a charitable gift receipt that reduces their income tax this year by just over $2,000. In addition, in this example they will be paying annual income tax not on $1,800 but only on $425. The tax will be $102.
Give Securities to West Park to reduce your income tax
John has shares of ABC Ltd. worth $24,000. He paid $12,000 for them in 2000. Either he or his estate will pay income tax on half of the gain, $6,000. Rather than leave them for his family, he gives them to West Park now. West Park will sell the shares immediately and use the funds for ministry. Since accumulated capital gains on gifts of public shares are tax free, John’s income tax of $2,400 on this transaction is eliminated. He also receives a charitable donation receipt of $24,000 to reduce his income tax otherwise payable. In this example John saves an additional $9,650 of income tax.
Give an Insurance Policy you no longer need to leave a larger estate
Mary has an old whole life insurance policy she bought when her children were young. She does not need the insurance any longer. The insurance coverage is $13,600 and the cash value is $4,500. If she gives the policy to West Park she receives a charitable gift receipt for $4,500 that reduces her taxes by $1,810. When she goes to glory, West Park receives insurance proceeds of $13,600 tax free from a donation that only cost $2,690 ($4,500 minus $1,810). Her gift has multiplied over five fold.
Give your RRSP or RRIF to West Park to reduce your income tax and then use Insurance to leave your children an even a larger estate
Jack and Eileen have $210,000 in their RRIF. They are both 65 and expect that there will be close to $100,000 left in the RRIF when they die. Their three children will only receive $60,000 after tax or $20,000 each. They could leave the RRIF to West Park and pay no income tax on that part of their estate. That is a savings of $40,000. They start investing $1450 a year into a Life Insurance policy worth $100,000 that pays the children the same inheritance as the RRIF but tax free instead of fully taxable. Each child receives $33,330 (before accounting for the cost of the insurance policy) as compared with $20,000. On death the estate receives a $100,000 charitable donation receipt that can be used to reduce income taxes. The taxes saved could be as high as $40,000 depending on the estate.
Give assets other than cash or securities to West Park
You may have other assets you may wish to donate to West Park. We encourage you to speak with a member of the Finance Committee. You will likely need to have a formal valuation of the assets completed. Once the value has been established, the gift can be donated in one of the methods described on this site.
These are examples. In some cases your situation may be different but the results could be just as powerful! Every effort has been made to insure the accuracy of the above information. Please consult your advisors before taking action as tax laws and regulations can change. If you do not have an advisor familiar with charitable gift giving strategies, please feel free to speak to a member of West Park’s Finance Committee.
Prepared Nov 3 2010