During the lifetime of the Donor, he or she provides a single donation or series of donations to the charity. In return, he or she receives a charitable donation receipt that reduces income tax.

 

Gifts in kind can include assets acceptable to the charity, whether vehicles, artwork or investments.  Non-financial gifts must be supported by appraisals to justify the charitable donation receipt.  Gifts of qualifying investments like shares in Canadian companies provide enhanced income tax treatment for the Donor.  He or she is credited with the fair market value of the donated shares, rather than the pre-capital gains tax value.  In addition to the charitable donation receipt that reduces income tax, the Donor avoids payment of the capital gains tax on the disposition of the shares.

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A gift of a financial asset (GIC or mutual fund or shares, for example) is made to a trustee.  The terms of the trust are that the Donor continues to receive all of the income from the investment for the rest of his or her life.  At the time the investment is transferred to the trust, the Donor receives a charitable receipt, lowering his or her taxes.  The Donor continues to enjoy the income from the investment until death, then the charity owns the investment.  This works well for Donors who want to make a charitable donation, but need to retain the income for their own support purposes.  The charity has certainty of receiving the capital, and the Donor receives a tax benefit while alive, instead of just his or her estate after death.

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Many people have "legacy" life insurance policies, taken out many years ago and now fully paid up.  They pay several thousands of dollars to the estate at death, but there is no real need for the policy from an estate planning perspective.  Some then simply cash in the policy for its paid up value.  An alternative is to retain the policy but designate it to the charity.  The Donor gets a charitable receipt for the value of the policy, saving income tax immediately.  The charity receives the proceeds of the policy following the death of the Donor. Another life insurance approach is for the Donor to take out a new policy, designating the charity as the beneficiary.  The Donor receives charitable receipts for the annual premiums paid, providing ongoing income tax benefit.  The charity receives the policy proceeds after
the death of the Donor.

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Donors who support a charity during their lifetimes may also consider making a bequest of a specified amount or percentage of their estates in their Wills.  This ensures that the good work they do for the charity does not cease upon death, and also provides tax relief for their estate.

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