Planned giving

Elaine and Harry did not think estate planning was for them-after all, other than some life insurance, a bit of RRSP savings and the family cottage, they had little financial assets. And really, their four kids would certainly not get rich from what would be left to them.

But when Elaine and Harry met with an Advisors with Purpose estate specialist to ensure that their Will was current and biblically sound, they were genuinely surprised. The couple learned that-after a potential tax bill of around $74,000-they would still leave an estate valued at close to $675,000.

After considering several options, Elaine and Harry chose to add a fifth child as a beneficiary to their Will ”“ a “Child Called Charity.”

This option enabled them to eliminate the tax bill and leave a little over $150,000 to each child. But the real blessing came when they saw that they could leave a gift of over $135,000 to charity. Never in their life had they been able to make that kind of donation.

Elaine and Harry shared with their children how, through their Will, they would continue to build God’s Kingdom. The legacy they left their children was indeed priceless.

Your will is an excellent gift instrument, and can be used to leave a legacy to your favorite charities. A will is the cornerstone to any estate planning. It also is the last communication you will have with your family and it is another opportunity to reaffirm your priorities and values to them.

Continuing your commitment to honouring the Lord with what He has given, you can designate a percentage of your assets in your will to Samaritan’s Purse, as well as care for your family.

Without estate or tax planning in your will, it is possible that the government could become an equal beneficiary of your estate. A significant tax event occurs when a person who is single passes away or if the remaining spouse passes. In most circumstances, tax sheltered funds-such as pensions and Registered Retirement Savings Plans-cannot be rolled over to anyone else. They must be taken into income and taxes are to be paid.

Charitable donations can offset those taxes to varying degrees, allowing more of your money to go to Samaritan’s Purse and your loved ones. Though most people give because they want to further the ministry of Samaritan’s Purse, it is wise to consider how you might offset some of the tax implications when your whole estate is liquidated.

You can donate almost any kind of property in many different ways. The most significant tax benefits will be available if you give stocks, mutual funds and bonds directly. You will receive a tax receipt for the market value of your donated assets, and also avoid paying capital gains taxes-a double benefit.

Giving appreciated securities directly to Samaritan’s Purse might be more beneficial in terms of taxes than giving cash.

If you donate listed securities, such as stocks, bonds, and mutual funds directly to Samaritan’s Purse, there is no capital gain tax to be paid. However if you cashed in the securities, 50 per cent of the appreciated capital gain is added into income and then open to tax. After paying the taxes, the amount of the gift to the charity is reduced and therefore the amount of the donation receipt is reduced, reducing your charitable donations tax credit as well.

However, by having your broker transfer the securities directly to the broker of Samaritan’s Purse, you give a larger gift, pay no tax on the capital gain and receive a larger donation receipt which generates a larger tax credit.

Here is an example of how this works:

Emily wants to give a gift to Samaritan’s Purse and she was planning to sell some of her stock. The stock currently has a market value of $10,000. She purchased the stock for $5,000 several years ago, so there is a capital gain of $5000. She was going to sell the stock and give the cash to Samaritan’s Purse. But she heard that there is significant benefit to giving the stock directly rather than cashing it in. The benefit to Emily is calculated below: (*A 45% tax credit rate it used in the calculations)

	Sell Stock	Donate Stock Directly
Market Value of Stock	$10,000	$10,000
Initial Cost of Stock	$  5,000	$  5,000
Capital Gain	$  5,000	$  5,000
Gain Open to Tax (%)	(50%) $  2,500	(0%) $  0,000
Gain Tax Rate—45%	(*45% x 2500) $  1,125	(*45% x 0 ) $  0,000
Net Proceeds	($10,000-$1,125) $ 8,875	(10,000—0 ) $10,000
Donation Receipt	$  8,875	$10,000
Tax Credit	(*45% of 8,875) $  3,993	(*45% of 10,000) $  4,500
Net Tax Benefit	(3,993-1,125) $  2,868	$  4,500
Difference of Net Tax Benefit $  1,632

 

If Emily sold the stock, she would pay $1,125 tax on half of the capital gain. She would have $8,875 left, reducing the amount given to charity. Emily would receive a donation receipt for $8,875, which would generate a tax credit on her year end taxes of $3,993. (45% per cent of $8,875.)

If Emily gave the stock directly to charity, she would give the charity $10,000. She would pay no tax on the capital gain. Her donation receipt of $10,000 would allow her to claim on her year end taxes a tax credit of $4,500. (*45% of $10,000.)

By donating stock directly, Emily pays no capital gains tax (instead of $1,125), receives a tax credit of $4,500 (instead of $3,993), and Samaritan’s Purse is given $10,000 instead of $8,875.

Talk to your financial advisor about the value of giving a gift of appreciated securities.

The tax advantages of a RRSP generate significant benefits during a person’s lifetime. Prior to retirement, funds invested in registered plans are tax deductible and then these funds grow in the tax deferred plan. But eventually the tax has to be paid. How might you reduce these taxes?

The ultimate benefit of a Registered Retirement Savings Plan (RRSP) is once you retire and need to withdraw these funds you will most likely be in a lower tax bracket because you are living off of a reduced income.

However, you may find during your lifetime you are in a financial position to donate a portion of these funds to charity and offset the tax implications with the charitable donation receipt. Everyone’s situation will vary, and you should be sure to consult your financial advisors regarding the tax ramifications.

In Instances of an Untimely Death

If a person is married and passes away, the tax sheltered funds of an RRSP can be rolled, taxfree, over to the remaining spouse. If the person is single, or the remaining spouse to pass away, a significant tax event occurs. Those funds that have been tax sheltered are now brought into the estate and are considered income, with any other income, and taxes are due on the whole amount.

You can offset the taxes if the funds are given in your will to a charitable organization like Samaritan’s Purse. The donation receipt generates a tax credit that can, in most cases, offset the tax owing on the RRSPs.

Another option is making Samaritan’s Purse the final beneficiary on a RRSP, Registered Retirement Income Fund (RRIF), or other registered pension plan. The gift bypasses the probate process and estate administrative costs are reduced. Again the donation receipt can offset taxes owing on these funds.

Life Insurance is an excellent estate planning tool and it can be used to create a significant gift to Samaritan’s Purse. With a relatively low investment in premiums a significant charitable asset can be created and given to Samaritan’s Purse.

You can purchase a new policy, name Samaritan’s Purse as the owner and the beneficiary, and maintain the policy by paying the premiums and receive a donation receipt for the premiums paid annually. At your passing a significant gift would go to Samaritan’s Purse.

Or you could name Samaritan’s Purse as a beneficiary or co-beneficiary of that new policy or any existing policy. At your passing, the life insured amount would go to Samaritan’s Purse and your estate would receive a donation receipt to be used as a tax credit.

You can donate an existing policy that you had purchased previously when your family was younger and name Samaritan’s Purse as owner and beneficiary. Rather than cancel that policy, you can maintain that policy by paying the premiums and receiving a donation receipt annually for the premiums paid. That donation receipt in turn can generate a tax credit to offset taxes.

If that existing policy has a cash surrender value, the charity could cash it in and issue you a donation receipt that can be used to generate a tax credit.

Property is often the largest asset that you own and yet it is not easily liquidated. But with proper planning it can be donated to Samaritan’s Purse, resulting in some significant tax benefits while providing a generous gift to ministry.

When sold, property other than your principle residence is open to capital gains tax, as half of the appreciated value or capital gains has to be declared as income. It is then taxed at your marginal tax rate. But if that property—residential, commercial or undeveloped real estate—is given to charity, you would receive a donation receipt equal to the appraised fair market value of your property. That donation receipt can be used as a tax credit, which should exceed the capital gains tax on that property, and offset other taxes as well.

If the gift is your personal residence, there would be no capital gains tax, and the tax credit generated would offset other taxes. Besides outright donations of real estate there are other options that allow you to live in the residence for your lifetime or retain a fractional interest in the property.

Memorial gifts are a unique way for you or others to honor the life of your loved one. It comes from the heart, for the benefit of many others. You can keep your loved one’s memory alive through the work of Samaritan’s Purse by directing family and friends to give in his or her name.

Honor gifts celebrate the accomplishment of your loved ones-a gift honoring a special birthday, anniversary, achievement, or just because. As well as making a tribute to your loved one, these special gifts impact the lives of others.