Giving Tuesday, falling on December 2nd this year, is a great reminder as we head into the holiday season to look at what causes could benefit from your charitable donations. But let’s face it, who has time to research and make these decisions in a tax efficient way before year end?
Charitable Foundations and Donor-Advised Funds: A Smarter Way to Give
When Canadians think about giving back, they often picture writing a cheque or donating online. But for those who want to make a lasting impact, charitable foundations offer a more strategic approach.
What is a Charitable Foundation?
A charitable foundation is a registered organization that manages donations and distributes funds to qualified Canadian charities who issue tax receipts for the Donation Tax Credit with your annual CRA filings.
Setting up a Private Foundation
Private Foundations are typically funded by a single family or corporation. Though rewarding, they come with significant legal and reporting responsibilities.
Accessing a Public Foundation
Public Foundations pool resources from many donors to ease the compliance responsibilities of private foundations thereby enhancing their accessibility to all of us. The foundation retains the administrative requirements permitting you to access all the benefits of Charitable Foundations through a Donor-Advised Fund (DAF).
What is a Donor-Advised Fund?
A DAF is a giving account established within a public foundation. As most public foundations are run through private wealth firms, the most common contributions are publicly traded securities. When you create and fund your DAF, you will be issued an immediate tax receipt while spreading out the time frame you have to make your charitable grants. In the meantime, the investments continue to grow tax-free.
Why Consider a DAF?
- Simplicity & Efficiency: A DAF consolidates your giving into one account, eliminating the need for multiple receipts or complex filings.
- Tax Advantages: You receive a tax deduction when you contribute, and you can carry it forward for up to five tax years. Donating appreciated securities can also eliminate capital gains tax, making your gift far more impactful than donating from your personal bank account.
- Legacy & Family Engagement: A DAF permits you an opportunity to involve your family in philanthropy. Imagine sharing valuable life lessons and holding family gatherings with true meaning to discuss the direction and beneficiaries of your DAF.
- Privacy: A DAF allows you an opportunity to keep your name private when granting funds, which can protect you from ongoing requests from your selected charities.
Final Thoughts
Charitable giving can be about more than generosity. It’s an opportunity to share the wealth you have created, benefit from real tax savings, and create a philanthropic legacy within your family or business. The use of a DAF permits access to a strategy that is often reserved for only the very wealthy, bringing accessibility to most of us, especially in the year we sell our practice and can really benefit from the tax savings.
Need Help Navigating Your DAF?
At C3 we have worked alongside the Value Partners Charitable Foundation for years and have first hand experience in guiding you through the intricacies of the process efficiently, allowing you to focus on what truly matters to you personally.
We’re here to help you make informed decisions that align with your financial goals. Reach out to us with any questions or to schedule a personalized conversation at roxanne@c3wealthadvisors.ca or 780-261-3098.
Roxanne Arnal is a Certified Financial Planner®, Chartered Life Underwriter®, Certified Health Insurance Specialist, former Optometrist, Professional Corporation President, and practice owner. She is dedicated to empowering individuals and their wealth by helping them make smart financial decisions that bring more joy to their lives.
This article is for information purposes only and is not a replacement for personalized financial planning. Errors and Omissions exempt.
ROXANNE ARNAL,
Optometrist and Certified Financial Planner
Roxanne Arnal graduated from UW School of Optometry in 1995 and is a past-president of the Alberta Association of Optometrists (AAO) and the Canadian Association of Optometry Students (CAOS). She subsequently built a thriving optometric practice in rural Alberta.
Roxanne took the decision in 2012 to leave optometry and become a financial planning professional. She now focuses on providing services to Optometrists with a plan to parlay her unique expertise to help optometric practices and their families across the country meet their goals through astute financial planning and decision making.
