Canadians give only 0.52 per cent of their income to charity, according to tax data from the Canada Revenue Agency. This figure only reflects income-based donations, not gifts from net worth. Yet many estates valued at $10 million or more prompt a critical question: is that large estate a good thing?
The Cost of Giving: Pennies on the Dollar
Many people don't realize that the cost of giving a dollar to charity can range from pennies to about 60 cents. If you give a dollar to charity, you will lower your tax bill by a minimum of 40 cents to more than 90 cents. How? Gifts of cash above $200 in a year receive a tax credit of 40 to 58 cents per dollar, depending on province and income. Gifts of securities with high unrealized capital gains can lower the cost to 25–35 cents. Flow-through shares for donations can reduce costs to less than 10 cents. Life insurance gifts also offer low-cost ways to donate, with annual premiums qualifying for full charitable tax receipts.
Why Act Now Instead of Waiting
Laura Cuthbertson, chief development officer at North York General Foundation, said: “We speak with many donors who underestimate how much of an impact they can have while they’re still around to see it. When someone can see clearly that a gift won’t put their financial security at risk, it changes the entire conversation from ‘Someday, in my will’ to ‘What can I do now?’” The foundation offers an online estate and donation planner calculator to help donors understand the impact of different giving levels on their estate value and lifetime tax bill.
Overcoming Barriers to Giving
Some Canadians hesitate to give, citing family needs or distrust of charities. However, for those with large estates, charitable giving can be a strategic part of financial planning. The potential size of some estates should spark serious discussions about annual giving, major gifts, and legacy or estate giving. Many would give more if they saw how much they could easily afford, especially when educated on effective methods.
Practical Benefits of Early Donations
Giving to charity earlier may have meaningful advantages over waiting to leave it all in a will. Not only can donors see their impact, but they also optimize tax benefits. For example, donating appreciated securities avoids capital gains tax and provides a tax credit. Life insurance policies can guarantee a sizable future gift at a low current cost. The key is to understand the options and plan accordingly.
