Canadians who want to make charitable donations have many issues to consider if they want to maximize the value and impact of their gift – whether it's a first contribution to a favourite cause or leaving a legacy in a will.
Rachel Blumenfeld, a partner at Miller Thomson LLP specializing in tax and estate planning, says that she's noticed a shift in the last few years in how donors approach their charitable giving.
"Donors want to know more about the charity – from the projects the organization is working on to a breakdown of its administration and programming costs. They also have a greater desire to specify where they want their money to go. If they are donating to a university, for example, donors often want to see the money going to a particular faculty or specific scholarship."
Those who plan to include charitable gifts within their wills need to do their homework to ensure their wishes are met, says Sandra Enticknap, a partner at Miller Thomson who also practices in the area of estate planning.
A simple matter that is often overlooked is properly identifying the charity. Ms. Enticknap cites an example of someone bequeathing money to the "Heart Fund" – which raised questions as to which charity was intended as the recipient of the gift.
She also notes that since many charities set up parallel foundations for their fundraising purposes, if a donor wishes to leave money in their estate to a particular charity the donor should check to see if the charity has a foundation to which the donation should be directed.
Another potential issue arises when individuals want to donate a gift to a charity for a particular project or purpose. "That's fine, so long as the charity can carry out the specified wishes," says Ms. Enticknap. "A charity may not have the infrastructure in place to follow through on the donor's intent. Particularly with large gifts, the donors should consider discussing the proposed gift with the charity" "
Ms. Enticknap and Ms. Blumenfeld tend to work with individuals for whom giving to charitable causes is a regular and longstanding habit. However, with the number of people making charitable donations declining, the federal government introduced a measure in the 2013 Budget to encourage Canadians who have not donated to charities to do so.
Those individuals who have not claimed the charitable donations tax credit since 2007 are eligible for the First-Time Donor's Super Credit (FDSC), as long as their spouse or common-law partner has also not claimed the credit in the past five years.
"Depending on the province you live in, your after-tax cost for a donation of $1,000 could be as low as $256," says Ms. Enticknap. "So although the cost to you is just over $250, the charity receives a $1,000 donation."
For many donors, tax credits like the FDSC are an appreciated benefit of donating money, rather than the primary impetus.
Ms. Blumenfeld says that when she meets with clients they talk first about the clients' desire to leave a legacy and then about any potential financial benefits. "If they have that charitable intent," she says, "that's when we start talking about tax benefits and determining the best way to structure their gift."
Rachel Blumenfeld SUPPLIED
Sandra Enticknap SUPPLIED