The Season of Giving
The holiday season seems to arrive faster and faster with each passing year. It’s a time to be with family and friends, to count our blessings and to think about those less fortunate.
It is important for each of us to set out plans for year-end in an attempt not to fall into a debt trap from over spending, but some of us look beyond the gifts to those around us and how we can provide for causes that are dear to our hearts. Indeed, there has been a shift in recent years towards giving charitable donations in lieu of gifts. These might be small token gestures or they might be more substantial, yet in both cases the enrichment from giving to the needy can exceed that from what we wrap up in paper and bows this season.
As much as we stress the importance of sound financial planning to discover what and how we should spend this time of year, a plan may also uncover the resources and advantages of significant gifting. Often this is something that individuals will outline in their wills and much has been written about how this can be extremely useful in estate planning. For instance, a large charitable bequest when we pass can be used to offset additional taxes that may be incurred at estate time; such as how the remaining balances of an RRSP or RRIF or taxed, or capital gains that materialize on the deemed disposition of secondary properties or non-registered investments.
An even stronger case can be made for advanced gifting. This involves identifying the ability to make a charitable bequest on our passing and bringing it forward either in a lump sum, or spread out over a number of years. There are two advantages to taking this approach. First, it has always been my belief that being alive to see your charitable support in action carries more satisfaction than waiting until we pass away. It is also possible that a charity that you name in your will may not be considered an eligible charity in the future. Second, if there are identified tax risks to your estate from those areas outlined above, it might make sense to bring your charitable donations forward so that you mitigate those additional taxes today. This might involve using tax credits from donations today to take more than your minimum RRIF payments and therefore put your RRIF on a trajectory towards a smaller balance at death. The same might be true in terms of triggering capital gains, such as in the selling or gifting of your cottage property. In both cases, always consider the gifting of investments that carry large capital gains.
Remember that as joyous as this season is, there are people and support agencies which have greater needs this time of year. Providing assistance will not only bring you more joy, but it might even be a smart tax strategy as well.
By Andrew Pyle
A, CFP, CIM, FMA, FCSI Branch Manager, Senior Wealth Advisor and Portfolio Manager, Scotia McLeod
The Pyle Group, www.pylegroup.ca 705-876-3701
