Giving With a Warm Hand and a Cold One - Part Two.

September 24, 2021 by David Christianson

Description of an image in the News page

In my last column, we talked about some of the emotional, practical, and personal considerations of providing gifts to family members or charities while you’re alive, versus in your Will, and hence through your estate. Or both.

We also talked about the new educational initiative of the Canadian Association of Gift Planners called Will PowerTM ( and how even a 1% gift of estates to charity by all Canadians could raise $40 billion for charities over the next 10 years. Take a look at that website and be inspired.

Today’s column is about the dollars and cents of each of those, focusing on tax ramifications of donations.

Making significant gifts to either family or charity should be preceded by good financial and tax advice. You’ll see just some of the reasons why below.

A gift to charity provides a tax credit of about 45% of the gift. The credit is lower on the first $250 donated each year, and higher if it’s your first time ever claiming a donation. But for most significant gifts, use the figure of 45%.

This means that a $1,000 gift to charity reduces your combined federal and provincial income taxes by about $450, whether you give now or through your estate.

In both cases, however, you may be able to increase your benefit by reducing taxes that would otherwise be paid. This is by giving a gift “in-kind” of “appreciated securities” instead of cash.

In plain language, this means you direct your investment advisor to transfer shares, mutual funds, ETF’s, or other publicly traded investments directly from your investment account to a charity. This makes the otherwise taxable capital gain tax free, while giving you the tax credit on the full amount transferred.

Example? Let’s say you bought 100 shares of a bank for $40 each five years ago (or in the depths of the pandemic 18 months ago) and those shares are now trading for $100 each. The total value is $10,000 versus your $4,000 cost. If you sold the shares for a profit of $6,000, half of that would be taxable under the current rules.

Depending on your tax bracket, you might pay between $1,000 or as much as $1,500 in taxes on the gain. You could then donate what’s left to charity and get a 45% tax credit on that amount.

However, if you transfer the $10,000 of shares directly to a charity, the capital gain becomes tax-free, and you get a 45% tax credit on the $10,000.

Your net benefit is $4,500, compared to your original investment of $4,000. Talk to your investment advisor about which opportunities currently exist in your portfolio.

This tax treatment is also available to your estate, but your Will needs to specify that your executors can use their discretion to satisfy your charitable gifts “in-kind”, through share transfers.

The approach is different when giving gifts to family. It usually makes sense to instead use surplus savings, where no capital gain will be incurred on the gift. These days, those savings aren’t paying much, so very little investment income will be lost.

If you can afford it, giving to both family and charity while you’re alive can be very satisfying, and gifting to charity in your Will can be very tax effective. You don’t have to choose one or the other.

When the second member of a married couple passes away, taxes will be payable on the full amount of any registered accounts (RRSP or RRIF, etc.), plus half the amount of capital gains on investments, second properties, or businesses.

Properly worded bequests to charity can significantly reduce that tax, while preserving a higher percentage of the estate for your beneficiaries. Think about it and get some good advice.

*     *     *

Dollars and Sense is meant as an introduction to this topic and should not in any way be construed as a replacement for personalized professional advice.

Please consult legal, tax, insurance and investment experts for advice on your unique situation.

David Christianson, BA, CFP, R.F.P., TEP, CIM is a Senior Wealth Advisor & Portfolio Manager with Christianson Wealth Advisors at National Bank Financial Wealth Management, and author of the book Managing the Bull, A No-Nonsense Guide to Personal Finance

Contact us

Get contact information for our team members and find out where our offices are.