When we think about charitable giving, we often picture volunteering our time or sending cash donations to groups that help in times of need. Planned giving on the other hand, allows you and your advisor to create a strategy to make a lasting impact on the causes you care about while also ensuring you benefit from valuable tax advantages. This is a quiet type of generosity that can help align your desire to give back and support the organizations you care about with your financial and estate plans, ensuring your legacy lives on.
While it may sound complicated, it really isn’t a lot of work. Planned giving simply involves making charitable donations in a thoughtful, structured way, either during your lifetime, through your estate or in some combination of both. It can also, in certain circumstances, allow for average Canadians to leave larger gifts than they might otherwise be able.
Benefits of donating
A recent study by Canadian researchers concludes that spending money on other people, what they call prosocial spending, increases your happiness. Add to this the fact that Canada has some of the most generous tax incentives for charitable giving in the world, and it’s a wonder that more Canadians aren’t taking advantage of a great way to reduce their overall taxes.
- Donors receive both federal and provincial tax credits,
- Donations can be in cash, in-kind transfer of securities held outside of registered accounts, appraised property such as real estate, art, antiques or certified cultural property,
- The more you donate, the larger the tax credit:
- There is a 15% federal tax credit on the first $200 donated, and
- A 29% tax credit on amounts over $200 (or a 33% federal tax credit if your income is within the top marginal tax bracket, $253,414 in the 2025 calendar year, this amount is indexed to inflation),
- Plus, the applicable provincial or territorial tax credit which can be up to 50% in some jurisdictions
- Tax credits can be shared between spouses and common-law partners,
- Tax credits can be carried forward for up to 5 years,
- Tax credits could offset up to 75% of taxable income in any taxation year, and up to 100% in the year of death and the year immediately preceding the year of death; and
- Corporations can benefit as well; incorporated companies are entitled to a deduction against their income for qualifying donations
There are many ways to donate, each with its own advantages and tax implications. As you work with your advisor to build out a plan consider when you want to give, what values are important to you, how much tax you want to reduce and then choose the option or combination of options that best suit your needs.
Donating to see the benefit of your gift
1. Monthly cash donations
Simple and consistent, you know your donation will go towards supporting ongoing programs. You’ll receive a donation tax credit in the year of the donation.
Example: After a review of her budget, Janet calculates she can afford to send $200/m to her favourite charity and sets up an automatic donation from her account each time she is paid.
2. Donation of securities in-kind
Donating publicly traded securities, mutual funds or segregated funds directly to a charity eliminates capital gains tax and provides a donation tax credit for the full market value—making it one of the most tax-efficient ways to give, these donations help create a stable future for the charity.
Example: if you sell appreciated securities before donating, 50% of the capital gain will be taxable to you, reducing your overall donation and potentially increasing how much tax you must pay. Donating the appreciated securities in-kind eliminates the need to pay tax on that gain, allowing you to donate the full amount.
3. Life insurance (assigned to charity)
A long-term strategy that satisfies both your need for donation tax credits today and creates a significant cash inflow to the charity in the future; this is one of the most underutilized yet powerful tools for charitable giving. By assigning ownership of a life insurance policy to a charity and naming them as the beneficiary, your premium payments qualify as charitable donations each year. This allows you to make a significant future gift at a relatively modest current cost—amplifying your impact far beyond what you might be able to give in cash today.
Example: A few hundred dollars a year in premiums could result in a six-figure donation to your chosen charity.
4. Donor Advised Fund (DAF)
A flexible, cost-effective option for smaller, lump sum donations, DAF accounts can be done with a financial planner at a credit union or bank, or if you want a hands-off approach, you can work with one of Canada’s many public foundations. These accounts can be thought of as a mini family foundation underneath the umbrella of a public foundation and are ideal for those wanting to simplify their donation strategy.
Donations can be in cash or in-kind securities, property or even life insurance; you will receive a donation tax credit each time you contribute. DAF accounts offer flexibility in giving, as you can not only support more causes with a single donation, but you also could potentially grow the charitable assets through investment. DAF accounts offer the additional benefit of keeping your donations anonymous if you prefer privacy.
Example: The Chan family has sold a rental property and wants to put some of the profit back into their community but are not sure which charities they want to donate to. Their financial planner suggests a Donor Advised Fund account under the umbrella of a public charity, not only will they receive a large donation tax credit this year to offset the gains from the sale, but they will have time to decide where to donate the funds.
5. Family foundation
Ideal for larger gifts (typically over $2 million) such as proceeds of a sale of a business, donation of public or private securities with significant capital gains, or even the opportunity for a family to pool charitable giving. A private foundation allows for long-term philanthropic planning, community recognition and for the family to maintain control over and customize how funds are used to support the causes they care about. Contributions are eligible for donation tax credits in the year made and private foundations can accept donations from multiple sources, further boosting their long-term legacy and family involvement.
Example: Mr. and Mrs. Dhothar have sold their successful family business and now want to establish a legacy for their family, but Mr. Dhothar is cautious about just giving money away. Their financial planner suggests creating a family foundation as it gives the donor both a high degree of control in directing where the funds are spent and a vehicle to enhance the family identity across multiple generations.
When you pass – leave a legacy
Including bequests to charities in your estate plan can be an easy way to leave a lasting legacy. Care must be taken when crafting this plan as not all estates are settled quickly. Estate administration takes time and because a charitable bequest in your will cannot be claimed for tax purposes until the gift is actually transferred to the charity, your estate may owe taxes before the donation is completed and the credit is applied.
The donation tax credit received can be claimed against up to 100% of your net income in the year of death and any extra can be carried back to the previous year. To qualify, the gift must be made by a Graduated Rate Estate to a qualified charity within 60 months of the date of death.
1. Life insurance (charity as beneficiary)
Naming a charity as the beneficiary of a life insurance policy is a simple yet powerful way to make a significant impact. When you retain ownership of the policy and designate a charity as the beneficiary, your estate receives a donation tax credit equal to the full death benefit—which can help offset taxes owed at death.
Your donation bypasses the estate entirely. The charity receives the funds directly and promptly, and your estate can immediately claim the full donation tax credit, making this a more efficient and timely way to give.
Example: Mary is a widow with no children and has an existing life insurance policy. Now that the original purpose of the insurance is no longer applicable, she wonders what to do with it. When Mary sought guidance from her financial planner, they suggested changing the beneficiary to her favourite charity, the one she volunteers with regularly, as that would be a great way to extend her charitable legacy.
2. Designating a charity as the beneficiary of your RRSP/RRIF
You may consider gifting your retirement savings to one or more charities, a choice that will not only benefit the charity but could offset the taxes owed when the registered retirement account falls into your estate. A charitable tax receipt for the market value of the account at the time of death will be issued to your estate.
Example: The balance in an RRSP or RRIF at death is fully taxed as regular income unless left to spouse or another qualified beneficiary. If you name a charity as the beneficiary of your registered retirement account, your estate will be entitled to a donation tax credit which could virtually eliminate all the tax owing on the plan assets. This means more money for both the charity and any other beneficiaries.
3. Testamentary Gift in Your Will
Gifts made to charities through your Will can be a percentage of your estate, a fixed amount or specific assets to be donated. While this is a meaningful way to leave a legacy, it’s important to plan carefully to ensure the gift is structured property and to verify in advance that the charity is capable of handling donations of complex assets so that the tax benefits are realized.
Example: Bob decides to leave a portion of his estate to his favourite charity, as he does not know for sure which assets he will have in the future, his lawyer recommends allocating a percentage of the estate to ensure the gift is allocated fairly among the charity and his other beneficiaries.
Ready to get started?
Creating a charitable giving plan is easier—and more rewarding—than you might think. Our experienced financial planners will work with you to design a strategy that fits your lifestyle, values, and legacy goals. Whether you’re considering a simple monthly donation or a more complex structure like a DAF, or life insurance strategy, we’ll bring in the right specialists to guide you every step of the way.
Let’s build your legacy together. Reach out today to start your personalized charitable giving plan.
The stuff we have to say
