Advisors can help their clients give back and make a difference, while making progress towards their own financial goals
The holiday season is fast approaching. Amid the celebrations, many Canadians are also thinking about how to give back. National Philanthropy Day on November 15 served as a powerful reminder to reflect on the causes that matter and take meaningful action to support them.
Canadians are facing tough times with a 7.1% unemployment rate, the highest seen since May 2016, excluding the COVID-19 years of 2020 and 2021, and a high cost of living. As we get closer to the holidays, 81% of Canadian consumers are considering cutting back to save money over the next six months, leaving some wondering how they can help others without sacrificing their own finances.
For advisors looking to help their clients make a difference, they must first understand how their client wants to give. Donors can choose to make an immediate impact or create a longer legacy with their gift. An advisor can help clients make plans to support the causes that matter to them, while uncovering benefits for their tax plans, making strategic philanthropy more than just a feel-good moment.
Once a client decides to make a charitable donation, they should first confirm that the organization is able to accept the gift and issue a valid tax receipt. Without it, they may lose the opportunity to claim non-refundable tax credits.
Next, determine what to donate. While cash is the simplest option, clients may have other assets that could make a meaningful impact. Above all, donations should align with their financial goals – both short- and long-term – including retirement and estate planning.
Clients can consider donating publicly traded securities, including stocks, mutual funds and ETFs. When donated, any accrued capital gain on the security is realized and the inclusion rate on the taxable portion of the capital gain is reduced to zero. Donors can benefit from the donation tax credit for the fair market value of the security donated and eliminate the capital gains tax.
To maximize the tax benefits available after making a more immediate charitable donation, advisors should consider their clients’ financial situation. If clients had a year with higher income, they should consider increasing their donations to take advantage of a higher donation tax credit, if available. Clients with a spouse or common-law partner can also claim their donations on a single tax return, and should consider doing so on the tax return of the partner with higher income levels to maximize the credit rate.
For clients looking to leave a legacy that extends beyond traditional donations of cash and securities, there are several strategic giving options worth considering. One approach is to donate a life insurance policy. By naming a charity as the direct beneficiary, the donor’s estate may receive a donation tax credit, resulting in substantial tax savings upon death. Alternatively, transferring ownership of a life insurance policy to a charity during one’s lifetime allows the donor to receive tax benefits over a longer period of time instead of at death, offering a more immediate financial advantage.
Another option for clients interested in providing longer-term charitable support during their lifetime, is to establish a donor-advised fund. Each contribution to the fund generates a tax receipt, and any growth or income generated is accrued on a tax-exempt basis. This structure enables clients to support their chosen causes over time, aligning their philanthropic goals with long-term financial planning.
Giving back to our communities is more than just bake sales and charity runs. In a time when impact matters more than ever, advisors can help clients build strategic giving plans that support the causes they care about while strengthening their overall financial well-being.
Christine Van Cauwenberghe is head of financial planning at IG Wealth Management
