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The end of the year is a time when many investors start thinking more about giving back some of their earnings – either from their job or investments – and donating it to charity.

Not only does giving back feels good, but there are tax advantages too, says Mark Halpern, chief executive officer of Inc. in Toronto.

In fact, he says more advisors should be discussing charitable giving with their clients as part of their wealth and estate plans.

“It’s incumbent on advisors to have philanthropy as part of the holistic conversation they’re having with clients,” he says.

Globe Advisor spoke with Mr. Halpern recently about some tax-efficient donation strategies.

What are some basics of charitable giving that advisors should discuss with their clients?

Many people don’t realize that Canadians can use charitable receipts to mitigate up to 75 per cent of their net taxes payable each year, and any amount over and above 75 per cent can be carried forward for up to five years. Some also don’t realize that in the year of death, charitable donations can be used to offset up to 100 per cent of estate taxes, and you can go back the prior year as well.

Cash, cheques and credit cards are the most popular way of giving, but are not the most efficient for investors. The most efficient way is through donating non-registered appreciated securities such as stocks, exchange-traded funds and mutual funds. When you donate securities to charity, you don’t pay capital gains taxes, and you receive a charitable receipt for the market value of the donation at the time of the sale.

What other tax-efficient charitable options are available?

There are private and public foundations as well as flow-through shares, all of which provide tax benefits.

A private foundation is mostly for people with many millions of dollars who want to set up their own philanthropic organization and handle all of the administration and donations. With a public foundation – also known as donor-advised funds – the donations are managed by a foundation or financial institution. There are a growing number of donor-advised funds in Canada and what many people like about them is the donation and tax receipt can be provided in a particular year, but they can decide later which charities will receive the funds.

With flow-through shares, investors can claim tax deductions for purchasing the shares issued by Canadian resources companies. The funds these companies raise must be used for exploration and development expenditures to qualify for the deduction.

Also, most people don’t realize that life insurance policies can be donated to charity. The donor receives a charitable donation tax receipt for the fair market value of a policy, which can be claimed for the year it was donated. You can also buy a life insurance policy and transfer ownership to a charity and have the premiums you pay considered charitable donations.

What’s the takeaway for advisors and their clients?

Year-end is a great time for advisors to be talking to clients about charitable giving – and there are several strategies they can take advantage of. It requires sitting down with somebody who understands the intersection between tax, philanthropy and estate planning so they can advise you properly on how to give back to the community while also saving on taxes.

- This interview has been edited and condensed.

- Brenda Bouw, special to The Globe and Mail

Must-reads from Globe Advisor this week

Investment exit strategies – what to do when it’s time to sell

Investor psychology can be a powerful force. No matter how investors fill out their risk tolerance assessments, when faced with a prolonged market downturn like the one we have seen this year, many will be considering exiting a portion of their investments. When it comes time to do some selling, it’s important to keep in mind the best investment exit strategies and how to implement them. Terry Cain speaks to experts on why sharp market downturns are not necessarily good times to sell but rebalancing the overall asset allocation could make sense.

What happens when retirees can’t sell their homes?

For some retiring clients, the recent slowdown in the housing market – both in terms of falling prices and declining sales activity – is affecting longstanding plans to sell their primary residences and free up cash as they enter retirement. As they consider their next moves, many are looking to their advisors for help in adjusting their expectations and for support in implementing new solutions to mitigate the impact of the pullback. They also want clarity on how best to proceed. Helen Burnett-Nichols reports on strategies to navigate the current housing market for such clients.

Looming recession tailwind for gaming as consumers look for ‘cheap’ entertainment

The fortunes of the video gaming industry have faded with the post-pandemic reopening, but paradoxically better days may lie ahead as the global economy slides into recession. Stay-at-home trends gave a big boost to the industry in 2020 and 2021, but this year, discretionary entertainment spending has gone elsewhere as everyone itches to get on the move again. However, once interest rate increases peak, strategists expect a rebound in gaming with a strong holiday season acting as an early indicator of recovery. Adam Mayers looks at the outlook for the sector and where the opportunities exist.

Six mistakes people make when moving between provinces

In the excitement of preparing to relocate for a new job or retirement, details with important financial repercussions can be overlooked, and it’s often up to the advisor in the new jurisdiction to untangle those mistakes and propose solutions. When people move to a place with a higher cost of living, provincial tax rate or real estate transfer tax, it can have a significant impact on their financial plan. Advisors can also serve as a quarterback connecting recent arrivals to the other professionals they need as they establish themselves in their new community. Alison MacAlpine looks at what people often get wrong when they move between provinces or territories and how advisors can help.

Also see:

How to quell recession fears with younger clients

How advisors can help retirees get the most out of tax breaks

Why inspiring clients have the power to lift advisors’ careers and lives

‘Green hushing’ on the rise as companies keep climate plans from scrutiny

Private equity circles fallen stars of pandemic IPO boom

What you and your clients need to know

Why selling HSBC Canada is unusually challenging

The dream scenario Big Six bank chiefs used to salivate over has come true: HSBC Bank Canada, the country’s seventh-largest lender, is up for sale. Yet, with the auction already in motion, pulling off the country’s most expensive bank deal in decades is shaping up to be a challenging exercise. The timing of the deal, coupled with a fraught political landscape, is making any sale much trickier than it otherwise might have been, according to 10 banking industry sources familiar with the business and the auction. Tim Kiladze, James Bradshaw and Andrew Willis report on the sale and what it means for the banking industry.

Ten Canadian-listed uranium stocks to watch as demand revives for nuclear power

With the global push to reduce fossil-fuel emissions, the energy crisis in Europe and the European Union’s labelling of nuclear power plant investments as “green” earlier this year, expect growing demand for nuclear power. What are we seeing for valuations for stocks in this space? Brian Donovan of StockCalc uses the company’s screener to select the top 10 uranium stocks by market capitalization listed on the Toronto Stock X and TSX Venture Exchange. He then uses StockCalc’s valuation tools to calculate the fundamental (or intrinsic) valuation for each stock to see whether it is undervalued or overvalued compared with its price. Here are the results.

Do you have a safety net? The coming recession could be the most unfair ever

The next chapter on financial inequality will be the divide between those who can afford to prepare their household finances for the coming recession and those who cannot. Keeping a stockpile of cash protects you against the interrupted incomes and job losses that are inevitable in a recession as employers react to a weakening business environment. Quite a few households can tick this box instantly. They’re the ones who continue to hold cash that piled up during pandemic lockdowns. And then there are the households who just made it through lockdowns in a financial sense and never built cash reserves – or those who have since spent that money. Rob Carrick looks at what those already struggling with affordability should do.

– Globe Advisor Staff

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