Charitable sector is begging for change and trusted professionals can play their part
Each year CanadaHelps publishes “The Giving Report”, a well-researched overview of the status of the charitable sector in Canada. You only need to read the ominously worded abstract – “a raw and honest look” – to know that it probably isn’t going to be positive. In my opinion, the report is required reading for anybody in the charitable sector.
Faced with increased demand for their services and increasing costs caused by inflation, many charities are starting to bend under the strain. Furthermore, total donations are down as individuals and corporations struggle to maintain – let alone increase – the amount they are able to give. If you feel like this is not sustainable for the long term, you’re right.
I give CanadaHelps President and CEO Duke Chang a lot of credit. The report doesn’t sugar-coat the challenges, nor does it analyse them through rose-coloured glasses. The subtitle of the report is “It’s Time for Change” – I couldn’t agree more. Because without change, charities might just be left begging for it.
What can change
But, what role can professional advisors – accountants, lawyers, portfolio managers – play in bringing about the type of change the charitable sector needs? As it turns out, quite a lot.
That’s because while individuals and corporations are good at identifying the causes that they wish to support, they aren’t always good at optimizing the way they support them. Most aren’t familiar with the rules, and rely on their professionals to remind them that:
- Donations to qualified organisations result in a charitable donation tax credit, which can be used to reduce overall tax payable. Donating to crowdsourced sites and making small cash donations at check-out counters or to non-qualified organisations do not qualify for a tax credit.
- Generally, taxpayers can claim part or all of their eligible gift amounts up to the limit of 75 per cent of their net income for a given year (more in Quebec). This may be especially beneficial to someone who sees their taxable income rise dramatically in a given year, perhaps as a result of the sale of a business or investment property.
- Gifts can be carried forward for five years, allowing for advanced tax planning to maximize the utility of the tax credit.
Many opt for convenience when making donations, using cash or credit cards. If only more people understood that there are other ways to support charitable causes that may generate tax savings over and above the donation tax credit! Before giving, it’s useful to understand the options. Many charitable organisations accept:
- Gifts of appreciated securities from taxable investment accounts,
- Gifts of existing life insurance policies, especially a policy that perhaps a client no longerrequires. (Today, there are insurance options specifically designed to be used as donations to charity.)
- While slightly more complicated, gifts of private company shares can be made to charitable organisations, and
- Gifts of art or other certified cultural property.
However, when clients decide to give, I always recommend they reach out to the charity directly, ensuring that their donation can be accepted and the appropriate charitable tax credit is generated.
Listen and learn
We’ve written about this before, but sometimes, the best thing you can do, as a professional advisor, is ask questions. Once you know the propensity or desire of your client to support charitable causes, you can then introduce them to ideas or other professionals, helping them create an optimal giving strategy.
“We work with our clients to include philanthropic goals and objectives as part of their wealth management strategy," says Mike Todd of the Funke Group at Scotia Wealth Management. “Starting these important discussions with your clients will help create a meaningful legacy.”
Which takes us back to the sobering words of The Giving Report. “The gaps that charities fill are diverse and invaluable, but charities can’t protect the sector alone.” Charities, donors and, yes, professional advisors have a part to play to create the changes we want to see in the world.
Craig Swistun is a Portfolio Manager with Lexicon Financial Group (www.lexiconfinancialgroup.com) at Raymond James Investment Counsel.
The opinions expressed are those of Craig Swistun and not necessarily those of Raymond James Investment Counsel which is a subsidiary of Raymond James Ltd. Statistics and factual data and other information presented are from sources believed to be reliable but their accuracy cannot be guaranteed. It is furnished on the basis and understanding that Raymond James is to be under no liability whatsoever in respect thereof. It is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. Raymond James advisors are not tax advisors and we recommend that clients seek independent advice from a professional advisor on tax-related matters.
