A capital property donation may occur in a current year or at death, and in qualified circumstances a donor may be entitled to tax relief presently while retaining personal use of the property for life.

This presentation looks at the considerations that inform a donor as to the optimal manner by which to structure a donation, and how life insurance can make that donation more effective.

This material is presented for informational purposes only, and is not a legal, tax or investment opinion to be relied upon either by an advisor or by a client.

Interested persons should seek retained independent professional advice before acting or foregoing action in relation to any of the matters mentioned herein.

Donating capital property to charityMaking philanthropy tax-efficient

Sales, Tax, Estate Planning, Underwriting & Product Team

COST• No splits or fees• No cost to Client• No cost to Advisor• No cost to MGA

CRITERIA• No arbitrary hurdles• Generally …

–Larger cases–Business cases–Estate/tax issues–Key clients

ACTIVITY•Resource contact•Seminars•Case consultation

COORDINATION• Account Manager

–Front-line support–Assist intermediate–Channeling advanced

PEOPLE• Lawyers• Accountants, & • Accredited financial professionals

MISSION• Boost value touches • Broaden options• Case placement assistance• Optimize case values

• Charitable tax credit

• Gifts of capital property

• Residual & remainder interests

• Timing & control

• Role of life insurance

Donating capital property to charityMaking philanthropy tax-efficient

Donating capital property to charityCharitable tax credit

• Two-tier tax credit structure– Credit on donations up to $200 is

at the lowest federal tax rate– Credit on donations over $200 is at

the lowest federal tax rate – Corresponding provincial credits

• Offset up to 75% of net income• Up to five years carryforward for

unused credit • In year of death

– Offset up to 100% of net income– Carryback offset up to 100% of net

income in year prior to death

Donating capital property to charityGifts of capital property

• At any disposition, capital gains & recaptured depreciation are taxed

– Gift is a deemed disposition

• When gift is made to a charity

– May elect disposition value from ACB to FMV for both capital gain tax and charitable credit

• Capital gains inclusion rate

– 25% rather than usual 50%

– Prescribed securities& funds, and ecologically sensitive lands

• No tax on principal residence

Donating capital property to charityResidual & remainder interests

• Current tax credit– Continue to use property for life

• Two common forms used– Residual interest in real property

– Charitable remainder trust

• Qualifying as a gift– Identification, size of interests,

vesting, & all conditions satisfied

• Valuing the interest - Actuary– FMV, life expectancy, interest

rates & case-specific factors

• Using a testamentary trust

Donating capital property to charityTiming & control

Lifetime donation Donation at deathRemainder/residual

Value of donation FMV FMV Portion of FMVEvidence Evidence Actuary

Charitable tax credit Current At death Current100-400% 100-200% 100-400%

Control To Charity Donor for life Donor for lifeImmediately & Revocable to Irrevocable to irrevocably charity at death charity at death

Ongoing costs Charity Donor for life Shared

Donating capital property to charityRole of life insurance

• Value recovery for residual beneficiaries – Replenish the estate

• Maintenance for surviving spouse – Support surviving spouse for life

• Leverage the charitable gift – In effect, donate twice