Canadians have more in them to give

Between the floods, hurricanes, earthquakes and tsunamis in the past year, some might be wondering if they have anything left to give to help these communities rebuild. But a newly released paper by TD Bank Financial Group suggests Canadians can be even more charitable, and advisors should be there to help.

“Many of the messages that the financial advisors would be signaling to their clients, as to how they should approach their investments, are the same messages that they can be sending about charitable giving,” says Craig Alexander, deputy chief economist at TD and author of the paper on charitable giving.

Specifically, Alexander feels advisors should counsel their clients to help them develop a philanthropic plan as they would a financial plan — one that sets aside money for future goals and fits into their estate planning needs. Going forward, the report says retiring baby boomers will find they are able to give more as they start to retire.

“Encouraging these donors to apply investment principles to their charitable giving may create a group of new philanthropists who are more engaged and have a bigger impact on the charitable sectors,” the report says.

While it isn’t up to advisors to choose charities, Alexander believes they should try to get the clients to think about this sort of thing. In many cases by asking these questions it can get people thinking about their financial plan, he adds.

Initially, this task seems daunting. There are over 161,000 non-profit organizations and over 80,000 registered charities in Canada. But an advisor doesn’t need to understand each one. Instead, they can discuss the tax implications and the various ways to maximize tax credits from donations.

One way to maximize the tax credits is to pool them, Alexander says. Tax credits can be squirreled away for up to five years, which can be especially beneficial to individuals who make smaller contribution.

Consider this: $200 donations receive a combined federal and provincial tax credit of around 25%. But donations above that amount receive a combined credit of up to 45%. “As a result,” Alexander writes in his report, “individuals who make small contributions may want to wait until they exceed the $200 threshold in order to maximize their tax credits.”

Alexander suggests advisors wanting to know more about some of the tax issues should take a moment to look at KPMG’s tax planning guide, which offers an extensive look at the various tax questions around charitable giving.

Money isn’t the only way to help out charities. Anything from financial assets like stocks, bonds and mutual funds to real estate can be part of a gift strategy. Most charities are happy to except them, Alexander says, although he cautions that some of the smaller organizations might not know what to do with them.

Automatic withdrawals are another unique way people are donating these days. This can be done in concert with a relatively new product TD offers called the TD Charitable Giving Foundation. With this product, individuals contribute to the plan and the proceeds are siphoned off and donated to the charities of their choice. “It gives people the benefit of being a foundation without it being a foundation,” he says.

These sorts of programs help create a system of giving over the long haul. “There is a tax advantage to giving over your lifetime rather than doing it through the estate,” he says. More importantly, charities benefit from this approach too. “The biggest problem charities have is that often the giving comes in fits and starts and it isn’t well thought out.”

Filed by Mark Brown, Advisor.ca, mark.brown@advisor.rogers.com