Donating capital property to charity
Making philanthropy tax-efficient
A capital property donation may occur in a
current year or at death, and in qualified
circumstances a donor may be entitled to
tax relief presently while retaining personal
use of the property for life.
This material is presented for
informational purposes only, and
is not a legal, tax or investment
opinion to be relied upon either by
an advisor or by a client.
Interested persons should seek
retained independent professional
advice before acting or foregoing
action in relation to any of the
matters mentioned herein.
This presentation looks at the
considerations that inform a donor as to the
optimal manner by which to structure a
donation, and how life insurance can make
that donation more effective.
Sales, Tax, Estate Planning,
Underwriting & Product Team
MISSION
• Boost value touches
• Broaden options
• Case placement assistance
• Optimize case values
COORDINATION
• Account Manager
PEOPLE
• Lawyers
• Accountants, &
• Accredited
financial professionals
ACTIVITY
• Resource contact
• Seminars
• Case consultation
–Front-line support
–Assist intermediate
–Channeling advanced
CRITERIA
• No arbitrary hurdles
• Generally …
–Larger cases
–Business cases
–Estate/tax issues
–Key clients
COST
• No splits or fees
• No cost to Client
• No cost to Advisor
• No cost to MGA
Donating capital property to charity
Making philanthropy tax-efficient
• Charitable tax credit
• Gifts of capital property
• Residual & remainder
interests
• Timing & control
• Role of life insurance
Donating capital property to charity
Charitable tax credit
• Two-tier tax credit structure
– Credit on donations up to $200 is
at the lowest federal tax rate
– Credit on donations over $200 is
at the lowest federal tax rate
– Corresponding provincial credits
• Offset up to 75% of net income
• Up to five years carryforward for
unused credit
• In year of death
– Offset up to 100% of net income
– Carryback offset up to 100% of
net income in year prior to death
Donating capital property to charity
Gifts of capital property
• At any disposition, capital gains &
recaptured depreciation are taxed
– Gift is a deemed disposition
• When gift is made to a charity
– May elect disposition value from
ACB to FMV for both capital gain
tax and charitable credit
• Capital gains inclusion rate
– 25% rather than usual 50%
– Prescribed securities& funds, and
ecologically sensitive lands
• No tax on principal residence
Donating capital property to charity
Residual & remainder interests
• Current tax credit
– Continue to use property for life
• Two common forms used
– Residual interest in real property
– Charitable remainder trust
• Qualifying as a gift
– Identification, size of interests,
vesting, & all conditions satisfied
• Valuing the interest - Actuary
– FMV, life expectancy, interest
rates & case-specific factors
• Using a testamentary trust
Donating capital property to charity
Timing & control
Lifetime donation Donation at death Remainder/residual
Value of donation
FMV
Evidence
FMV
Evidence
Portion of FMV
Actuary
Charitable tax credit
Current
100-400%
At death
100-200%
Current
100-400%
Control
To Charity
Immediately &
irrevocably
Donor for life
Revocable to
charity at death
Donor for life
Irrevocable to
charity at death
Ongoing costs
Charity
Donor for life
Shared
Donating capital property to charity
Role of life insurance
• Value recovery for residual
beneficiaries
– Replenish the estate
• Maintenance for surviving spouse
– Support surviving spouse for life
• Leverage the charitable gift
– In effect, donate twice