Even if cash is tight, there are other ways to give; for example, did you know you can donate your securities? Jo-Anne Ryan, Executive Director of the Private Giving Foundation, and VP of Philanthropic Advisory Services at TD Wealth joins Kim Parlee to talk about how donating those securities might make a lot of financial sense.
Print Transcript
All right, we are back, and as we've mentioned, the markets keep going up and up and up. So maybe it's time to share some of that wealth. You want to pass it on to some charities that you feel are doing some really great work. And Jo-Anne Ryan is Executive Director of the Private Giving Foundation at TD, and also the Vice-President of Philanthropic Services-- Philanthropic Advisory Services at TD Wealth. She's going to tell us exactly how to do it and some other ideas.
It's great to have you here. It's the time of year we have you here. Why does it make sense for people to donate securities? It can be anything, not just equity, but securities instead of money.
Great. Well, thanks for having me. And this is the time of year because December 31 is creeping up really closely, of course, which is the deadline to make donations that can be claimed in the 2017 year. So you can give cash, and depending on the province, you're going to get about half of it back with the combined federal and provincial tax credits. But if you have appreciated securities, stocks, mutual funds that have gone up in value-- if you donate them to charity, you'll still get half of it back in a tax credit, but you'll eliminate the capital gains. And so of course, normally if you sell stocks, 50% of the capital gains is taxable, so this is a way to eliminate that capital gains and support your favorite charity also.
That's awesome. So let's bring up a board, because I'm a big believer in let's go and look at the numbers, so let's bring it up in here. We've got-- on the left, we're showing what happens if you had shares sold, then donated the proceeds. On the right, this is what happens if you donate your shares directly. And the bottom line here shows us the net tax savings.
Right, so in this example, if you sell the securities, there's capital gains tax owed of $1,150. So basically, the bottom line is you save that capital gains tax if you donate the securities directly. And even if you like that stock, and you think that stock is still going to go up, you can buy that back immediately with other money, and then you've stepped up the cost to the new market value, so you can still participate in the upside. You don't have to wait 30 days to buy it back like you do with--
Superficial loss, and all that kind of good stuff.
Exactly, yes.
And the bottom line here is the charity is still getting the exact same amount.
They get the exact same amount. In fact, what the charity will do is they will sell it as soon as they receive it, but they'll have the same amount. And you will have saved more tax, which ultimately means you can give more.
I was just going to say, is you could take that savings and just pump it-- you give a little bit more to the charity, which would be nice as well. Any security, you can donate?
Any publicly traded securities that trades on any recognized market in the world is good.
Now, I'm expecting that-- we've talked, with this, the mechanics take a little longer. This isn't like donating cash, so you can't just say, hey, I'm going to donate this to you on December 31.
Correct. So most charities will have a policy. They'll have a brokerage account somewhere, they'll have a procedure that you will follow. So really, the best thing to do is talk to the charity, make sure you have their brokerage number, the procedures, the processes. But I would suggest getting it going sooner than later, because it does take time sometimes, especially if you're transferring from one brokerage account to a different company's brokerage account.
Right, you need that time to do that, and yeah, December 1st I'd say, always a good time to start, or December 6th. Today is a good day to start this. What if-- and we talked about this before-- you have the money. Again, you've done well in the market.
You do want to donate, but you know, sometimes it's like, OK, I want to get the transaction done, but I'm not sure who to give it to yet. Maybe I'm deciding between a few different charities or things. You've got-- this is, I think, one of the most-- it should be talked about all the time, the best thing to think about.
So we have the Private Giving Foundation, which is a simple, easy alternative to establishing your own foundation. It can be open literally in minutes, and minimum is only $10,000, so you don't need the millions you would need for your own foundation. So it's a way of establishing a long term legacy of giving. So if you have large capital gains, or you've sold a business, and you have a tax liability, you can donate now, get that donation receipt, and decide later. And build that longer term legacy of giving through a more thoughtful philanthropic plan.
Yeah, and you said the minimum for this, again, is what?
$10,000.
Which is not-- I think people think it's a huge barrier. It's not.
Yeah, we've made the concept of having your own foundation accessible to many people.
Yeah, and if you-- let's say that you want to give some gifts over the holidays, you want to give somebody else the ability to donate to charity, I mean, you give them cash, but there's another idea as well.
Sure, one of my favorite organizations is canadahelps.org. And what you can do with CanadaHelps is you can go in-- for example, if you wanted to spend $100, you could buy a CanadaHelps gift card online for $100. You get, as the purchaser, get the donation receipt, and then you can give that, and you can give it by email to somebody. And they would then have that gift card, and they would get to pick and choose online any of the 86,000 charities in Canada to give to. Or you could print it, wrap it up, hand it to them at Christmas. And again, it's your donation, it's your receipt, but they get to pick their charity.
Yeah, and I love doing that. Actually, I do it every year. So let me ask you, I mean, because this is what you do, and you advise people on doing this. I mean, this is a busy time of year for you, I assume?
It is because people procrastinate, and just like we see in our SP season, a lot of people do wait until the end of the year. And the charities know that, so they're making a lot more appeals this time of year, and people are getting serious knowing that that deadline is looming.
So you also-- I mean, if someone could turn back time, but you would tell people maybe do this maybe a bit earlier if they could?
A little earlier, plan it a little earlier. It gives you the chance to be more strategic, I guess.
Exactly, exactly, but if you use the Private Giving Foundation, you can get the money in, get the donation receipt, and then take the time. And we work with our clients to develop a strategic philanthropic plan that reflects their values, as opposed to reacting to charities that are constantly asking.
Really good point. Jo-Anne, always a pleasure.
Thank you, Kim.
You're welcome. Jo-Anne Ryan-- she's Vice-President of Philanthropic Advisory Services at TD Wealth, and also Executive Director of the Private Giving Foundation at TD Wealth.
It's great to have you here. It's the time of year we have you here. Why does it make sense for people to donate securities? It can be anything, not just equity, but securities instead of money.
Great. Well, thanks for having me. And this is the time of year because December 31 is creeping up really closely, of course, which is the deadline to make donations that can be claimed in the 2017 year. So you can give cash, and depending on the province, you're going to get about half of it back with the combined federal and provincial tax credits. But if you have appreciated securities, stocks, mutual funds that have gone up in value-- if you donate them to charity, you'll still get half of it back in a tax credit, but you'll eliminate the capital gains. And so of course, normally if you sell stocks, 50% of the capital gains is taxable, so this is a way to eliminate that capital gains and support your favorite charity also.
That's awesome. So let's bring up a board, because I'm a big believer in let's go and look at the numbers, so let's bring it up in here. We've got-- on the left, we're showing what happens if you had shares sold, then donated the proceeds. On the right, this is what happens if you donate your shares directly. And the bottom line here shows us the net tax savings.
Right, so in this example, if you sell the securities, there's capital gains tax owed of $1,150. So basically, the bottom line is you save that capital gains tax if you donate the securities directly. And even if you like that stock, and you think that stock is still going to go up, you can buy that back immediately with other money, and then you've stepped up the cost to the new market value, so you can still participate in the upside. You don't have to wait 30 days to buy it back like you do with--
Superficial loss, and all that kind of good stuff.
Exactly, yes.
And the bottom line here is the charity is still getting the exact same amount.
They get the exact same amount. In fact, what the charity will do is they will sell it as soon as they receive it, but they'll have the same amount. And you will have saved more tax, which ultimately means you can give more.
I was just going to say, is you could take that savings and just pump it-- you give a little bit more to the charity, which would be nice as well. Any security, you can donate?
Any publicly traded securities that trades on any recognized market in the world is good.
Now, I'm expecting that-- we've talked, with this, the mechanics take a little longer. This isn't like donating cash, so you can't just say, hey, I'm going to donate this to you on December 31.
Correct. So most charities will have a policy. They'll have a brokerage account somewhere, they'll have a procedure that you will follow. So really, the best thing to do is talk to the charity, make sure you have their brokerage number, the procedures, the processes. But I would suggest getting it going sooner than later, because it does take time sometimes, especially if you're transferring from one brokerage account to a different company's brokerage account.
Right, you need that time to do that, and yeah, December 1st I'd say, always a good time to start, or December 6th. Today is a good day to start this. What if-- and we talked about this before-- you have the money. Again, you've done well in the market.
You do want to donate, but you know, sometimes it's like, OK, I want to get the transaction done, but I'm not sure who to give it to yet. Maybe I'm deciding between a few different charities or things. You've got-- this is, I think, one of the most-- it should be talked about all the time, the best thing to think about.
So we have the Private Giving Foundation, which is a simple, easy alternative to establishing your own foundation. It can be open literally in minutes, and minimum is only $10,000, so you don't need the millions you would need for your own foundation. So it's a way of establishing a long term legacy of giving. So if you have large capital gains, or you've sold a business, and you have a tax liability, you can donate now, get that donation receipt, and decide later. And build that longer term legacy of giving through a more thoughtful philanthropic plan.
Yeah, and you said the minimum for this, again, is what?
$10,000.
Which is not-- I think people think it's a huge barrier. It's not.
Yeah, we've made the concept of having your own foundation accessible to many people.
Yeah, and if you-- let's say that you want to give some gifts over the holidays, you want to give somebody else the ability to donate to charity, I mean, you give them cash, but there's another idea as well.
Sure, one of my favorite organizations is canadahelps.org. And what you can do with CanadaHelps is you can go in-- for example, if you wanted to spend $100, you could buy a CanadaHelps gift card online for $100. You get, as the purchaser, get the donation receipt, and then you can give that, and you can give it by email to somebody. And they would then have that gift card, and they would get to pick and choose online any of the 86,000 charities in Canada to give to. Or you could print it, wrap it up, hand it to them at Christmas. And again, it's your donation, it's your receipt, but they get to pick their charity.
Yeah, and I love doing that. Actually, I do it every year. So let me ask you, I mean, because this is what you do, and you advise people on doing this. I mean, this is a busy time of year for you, I assume?
It is because people procrastinate, and just like we see in our SP season, a lot of people do wait until the end of the year. And the charities know that, so they're making a lot more appeals this time of year, and people are getting serious knowing that that deadline is looming.
So you also-- I mean, if someone could turn back time, but you would tell people maybe do this maybe a bit earlier if they could?
A little earlier, plan it a little earlier. It gives you the chance to be more strategic, I guess.
Exactly, exactly, but if you use the Private Giving Foundation, you can get the money in, get the donation receipt, and then take the time. And we work with our clients to develop a strategic philanthropic plan that reflects their values, as opposed to reacting to charities that are constantly asking.
Really good point. Jo-Anne, always a pleasure.
Thank you, Kim.
You're welcome. Jo-Anne Ryan-- she's Vice-President of Philanthropic Advisory Services at TD Wealth, and also Executive Director of the Private Giving Foundation at TD Wealth.
