A smart giving strategy can help ensure your charitable donations have the biggest impact. Jo-Anne Ryan, Vice President, Philanthropic Advisory Services, TD Wealth and Executive Director, Private Giving Foundation, joins Greg Bonnell to talk about the tax advantages of donating securities, the benefits of using a donor-advised fund, as well as some causes that could use support now.
Print Transcript
[AUDIO LOGO]
* It's giving season, so if you're thinking about making a one-time charitable donation or establishing a more fulsome giving strategy, you probably want to know how you can do that in a way that's impactful and-- let's face it-- tax effective. Jo-Anne Ryan, Vice President of Philanthropic Advisory Services at TD Wealth and Executive Director of the Private Giving Foundation, joins us now with some things to consider. Jo-Anne, a fascinating topic, great to be chatting with you about it.
* Thanks for having me.
* So let's start right at the beginning. Where are we really seeing the need this year when it comes to this kind of giving?
* Well, front of mind is food insecurity. So I don't have to tell you, but if you've done grocery shopping lately or been to a restaurant, the price of food has skyrocketed. And the use of food banks is really, really high. In fact, I was reading this morning in Toronto, 1 in 10 people that live in the city are accessing food banks, including people with full-time jobs.
* But besides that, obviously, inflation is a concern right now. We've had the situation in Ukraine, the Middle East. And this past year, we had our own natural disasters right in Canada with the wildfires. So we're seeing a lot of demand. During COVID, violence against women was a huge issue. So women's shelters and organizations supporting women were really top of mind.
* The good thing is a lot of fundraising events have come back to be in-person events. So there is a lot of activity out there. People are happy to be back at events and raising money. But it's United Way season also. So social services, shelter, clothing, food, all of those organizations have really, really great needs.
* So the need is clearly there. People do want to help in good cause. So let's talk about some of the ways people can approach their giving strategy. First off, how important is it to choose that charity, to know who you're giving money to?
* Well, we encourage our clients to do a philanthropic plan just like you would do a financial plan. So there are 86,000 registered charities in Canada. And they're all asking for money, many calling you during dinner. And so you don't-- what we don't want to see, especially during tax time, is our clients come in with a shoe box full of tax receipts that represent a mishmash of every cause out there because they're just reacting when people are approaching them.
* So in a philanthropic plan, we really talk about what values are important to you, the causes important to you, the geographic area, and encourage you to do your due diligence and your research. And if you sit and do a philanthropic plan and narrow down what your focus is, as opposed to being really scattered, you can have greater impact. In fact, what some families tell us is after they've done that plan, it becomes easier to say no if a request comes in, but it doesn't fit what you and your family have decided is important.
* But do your due diligence. Look at their financials. Even though charities are tax exempt, there's an information return filed on CRA's site. And look at their financials. Talk to the people that work at the charity. You want to look at the board. And, hopefully, there's some diversity on the board that represents the type of people that they're serving. Ask about their strategic plan. And look at the turnover in leadership. All of those things should come into play when you're deciding if the charity is right for you to support. And if you're considering a major gift, ask how they're going to communicate with you so that you can understand the impact that you're having.
* That's a great point to consider there. When people think about charitable donations, they think about cash. Obviously, that's not the only way. Let's talk about securities. Some people, it's an option. But what are the tax implications?
* So we actually have very generous tax incentives in Canada when it comes to charitable giving compared to other countries. But tax is not the number one motivator in terms of why people give. People give because they want to support their community, or a particular cause has impacted them or their families.
* But we do encourage clients to give in the most tax-efficient way. So cash is great. But if you have appreciated publicly traded securities or mutual funds, and you donate them to charity, you'll still get a tax receipt for the market value. But you eliminate the capital gains tax.
* And so normally, if you sell a security, 50% of the gain is taxed as income. So it's a great opportunity to make a donation and eliminate the capital gain. And even if you still like the stock, and you think there's still upside potential, you can make the donation, get the receipt, eliminate the capital gain, and buy it back immediately. And then you've just increased your cost to the new market value.
* Very interesting. I didn't know that. Another area I'm not too familiar with either, donor-advised funds-- What are these?
* Donor-advised funds are a simple, easy alternative to establishing your own private foundation. So we do help people establish private foundations. But that can be a lot of work and a lengthy process. We were the first financial institution in Canada to launch a donor-advised fund program, the Private Giving Foundation. And I actually brought the concept to TD in 2004. So we're getting very close to celebrating our 20-year anniversary.
* So, basically, you have a public foundation already established. You don't have to go set one up with a lawyer. And within that public foundation, very simple paperwork, you can open your own fund. You can call it whatever you want, the Smith Family Foundation, the Smith Fund for the Arts. Minimum only $10,000, so you don't need the millions that you would need if you were establishing your own foundation.
* You donate to it in cash or securities. Foundations are tax exempt. They will grow tax free. And then every year, you tell us what charities you would like us to send funds to. So you're separating the donation to the foundation from the granting to the charity. It's not always tax driven. But if you have a taxable event, like you're selling a business, you may want a tax receipt up front and then establish a charitable legacy of giving over the long term.
* Another fascinating area there, too. What about using your estate plan for a charitable gift?
* Well, an estate planner or gift planning is also very, very important. So you can establish a bequest in your will to a donor-advised fund or to charities of your choice. You can also name charities as designated beneficiaries for registered plans or for TFSAs.
* And there are some tax benefits to doing it through your estate. So we definitely suggest you talk to gift planning specialists at charities, as well as your tax and estate lawyer, to determine how best to incorporate philanthropy as both part of financial plans, as well as your estate plan.
* I was going to ask you. I mean, you've laid out this really clearly and nicely. And I'm fully understanding. But at the same time, there are considerations, people you should speak to if you're starting to think to go down this road.
* Sure. So if your situation is complicated, speak with your tax advisor. But, also, speak to your financial advisor. So at TD, we have four pillars that we address with our clients. And one of those pillars is leaving a legacy. For many of our clients, that legacy is actually a charitable legacy.
* So your tax advisor, your financial advisor, and go talk to the charity. Because as I was saying, a lot of charities have gift planning specialists on staff. And if you're considering especially an estate gift, you want to ensure that when the charity eventually uses it that they're going to use it for purposes that you want them to do. So lots of people in a team that you would speak to when planning your gifts.
[AUDIO LOGO]
[MUSIC PLAYING]
* It's giving season, so if you're thinking about making a one-time charitable donation or establishing a more fulsome giving strategy, you probably want to know how you can do that in a way that's impactful and-- let's face it-- tax effective. Jo-Anne Ryan, Vice President of Philanthropic Advisory Services at TD Wealth and Executive Director of the Private Giving Foundation, joins us now with some things to consider. Jo-Anne, a fascinating topic, great to be chatting with you about it.
* Thanks for having me.
* So let's start right at the beginning. Where are we really seeing the need this year when it comes to this kind of giving?
* Well, front of mind is food insecurity. So I don't have to tell you, but if you've done grocery shopping lately or been to a restaurant, the price of food has skyrocketed. And the use of food banks is really, really high. In fact, I was reading this morning in Toronto, 1 in 10 people that live in the city are accessing food banks, including people with full-time jobs.
* But besides that, obviously, inflation is a concern right now. We've had the situation in Ukraine, the Middle East. And this past year, we had our own natural disasters right in Canada with the wildfires. So we're seeing a lot of demand. During COVID, violence against women was a huge issue. So women's shelters and organizations supporting women were really top of mind.
* The good thing is a lot of fundraising events have come back to be in-person events. So there is a lot of activity out there. People are happy to be back at events and raising money. But it's United Way season also. So social services, shelter, clothing, food, all of those organizations have really, really great needs.
* So the need is clearly there. People do want to help in good cause. So let's talk about some of the ways people can approach their giving strategy. First off, how important is it to choose that charity, to know who you're giving money to?
* Well, we encourage our clients to do a philanthropic plan just like you would do a financial plan. So there are 86,000 registered charities in Canada. And they're all asking for money, many calling you during dinner. And so you don't-- what we don't want to see, especially during tax time, is our clients come in with a shoe box full of tax receipts that represent a mishmash of every cause out there because they're just reacting when people are approaching them.
* So in a philanthropic plan, we really talk about what values are important to you, the causes important to you, the geographic area, and encourage you to do your due diligence and your research. And if you sit and do a philanthropic plan and narrow down what your focus is, as opposed to being really scattered, you can have greater impact. In fact, what some families tell us is after they've done that plan, it becomes easier to say no if a request comes in, but it doesn't fit what you and your family have decided is important.
* But do your due diligence. Look at their financials. Even though charities are tax exempt, there's an information return filed on CRA's site. And look at their financials. Talk to the people that work at the charity. You want to look at the board. And, hopefully, there's some diversity on the board that represents the type of people that they're serving. Ask about their strategic plan. And look at the turnover in leadership. All of those things should come into play when you're deciding if the charity is right for you to support. And if you're considering a major gift, ask how they're going to communicate with you so that you can understand the impact that you're having.
* That's a great point to consider there. When people think about charitable donations, they think about cash. Obviously, that's not the only way. Let's talk about securities. Some people, it's an option. But what are the tax implications?
* So we actually have very generous tax incentives in Canada when it comes to charitable giving compared to other countries. But tax is not the number one motivator in terms of why people give. People give because they want to support their community, or a particular cause has impacted them or their families.
* But we do encourage clients to give in the most tax-efficient way. So cash is great. But if you have appreciated publicly traded securities or mutual funds, and you donate them to charity, you'll still get a tax receipt for the market value. But you eliminate the capital gains tax.
* And so normally, if you sell a security, 50% of the gain is taxed as income. So it's a great opportunity to make a donation and eliminate the capital gain. And even if you still like the stock, and you think there's still upside potential, you can make the donation, get the receipt, eliminate the capital gain, and buy it back immediately. And then you've just increased your cost to the new market value.
* Very interesting. I didn't know that. Another area I'm not too familiar with either, donor-advised funds-- What are these?
* Donor-advised funds are a simple, easy alternative to establishing your own private foundation. So we do help people establish private foundations. But that can be a lot of work and a lengthy process. We were the first financial institution in Canada to launch a donor-advised fund program, the Private Giving Foundation. And I actually brought the concept to TD in 2004. So we're getting very close to celebrating our 20-year anniversary.
* So, basically, you have a public foundation already established. You don't have to go set one up with a lawyer. And within that public foundation, very simple paperwork, you can open your own fund. You can call it whatever you want, the Smith Family Foundation, the Smith Fund for the Arts. Minimum only $10,000, so you don't need the millions that you would need if you were establishing your own foundation.
* You donate to it in cash or securities. Foundations are tax exempt. They will grow tax free. And then every year, you tell us what charities you would like us to send funds to. So you're separating the donation to the foundation from the granting to the charity. It's not always tax driven. But if you have a taxable event, like you're selling a business, you may want a tax receipt up front and then establish a charitable legacy of giving over the long term.
* Another fascinating area there, too. What about using your estate plan for a charitable gift?
* Well, an estate planner or gift planning is also very, very important. So you can establish a bequest in your will to a donor-advised fund or to charities of your choice. You can also name charities as designated beneficiaries for registered plans or for TFSAs.
* And there are some tax benefits to doing it through your estate. So we definitely suggest you talk to gift planning specialists at charities, as well as your tax and estate lawyer, to determine how best to incorporate philanthropy as both part of financial plans, as well as your estate plan.
* I was going to ask you. I mean, you've laid out this really clearly and nicely. And I'm fully understanding. But at the same time, there are considerations, people you should speak to if you're starting to think to go down this road.
* Sure. So if your situation is complicated, speak with your tax advisor. But, also, speak to your financial advisor. So at TD, we have four pillars that we address with our clients. And one of those pillars is leaving a legacy. For many of our clients, that legacy is actually a charitable legacy.
* So your tax advisor, your financial advisor, and go talk to the charity. Because as I was saying, a lot of charities have gift planning specialists on staff. And if you're considering especially an estate gift, you want to ensure that when the charity eventually uses it that they're going to use it for purposes that you want them to do. So lots of people in a team that you would speak to when planning your gifts.
[AUDIO LOGO]
[MUSIC PLAYING]