Philanthropy: A powerful tool to create lasting impact

In today’s world, where social responsibility and financial savvy often go hand in hand, people are discovering the power of philanthropy to make a difference while also managing their tax burden. It’s a win-win situation that allows you to support causes close to your heart while potentially reducing your tax liability. Let’s explore how you can leverage philanthropy to create a lasting legacy and improve lives, all while optimizing your financial strategy.

The state of giving in Canada

Before we dive into the benefits, it’s important to understand the current philanthropic landscape. According to the 2023 Giving Report from CanadaHelps, there’s been a concerning trend in charitable giving. The percentage of Canadians donating to charities has dropped from 36% to 28% since 2010. This decline is likely due to various factors, including inflation and rising interest rates which have left many with less disposable income for charitable contributions.

However, for those in a position to give, this decline presents an opportunity to make an even greater impact. Your contributions can help fill the gap and support vital community services and initiatives.

The tax advantages of charitable giving

In Canada, charitable donations can offer significant tax benefits. The amount of your tax credit depends on the size of your donation. There are also ways to transfer existing assets such as securities in a way that creates tax benefits and tax efficient transfer. This means that your charitable contributions not only help worthy causes but can also reduce your overall tax burden.

One particularly effective strategy is the use of life insurance policies for charitable giving. By purchasing a life insurance policy and naming a charity as the beneficiary, you can create a substantial future donation while enjoying tax benefits today. The premium payments for such policies are typically tax-deductible, offering immediate tax relief while setting up a significant future gift.

Building a legacy through philanthropy

Beyond the tax benefits, philanthropy offers high-net-worth individuals a unique opportunity to leave a lasting legacy. Your contributions can have a tangible impact on causes and communities you care about, creating positive change that extends far beyond your lifetime.

Supporting a charity can be an incredibly rewarding experience. It allows you to witness firsthand the impact of your generosity on your community. Whether it’s funding medical research, supporting education initiatives, or preserving the environment, your contributions can make a real difference in people’s lives.

Moreover, involving your family in your philanthropic efforts can help instill important values in younger generations, ensuring that your legacy of giving continues well into the future.

Developing a philanthropic strategy

To maximize both the impact of your giving and the potential tax benefits, it’s crucial to develop a thoughtful philanthropic strategy. This might involve:

• Identifying causes that align with your values and goals.
• Researching charities to ensure your donations are used effectively.
• Understanding the tax implications of different giving methods.
• Considering the timing of your donations for optimal tax planning.
• Exploring options such as life insurance, securities transfers, or donor-advised funds.
   

Each of these elements requires careful consideration and often benefits from professional guidance to ensure your philanthropic efforts align with your overall financial strategy. The key is to focus first on your “why” and then work with your advisor on the “how.”

The bottom line

Philanthropy is a powerful tool to make a positive impact on the world, create a lasting legacy, support causes you’re passionate about and engage in effective tax planning.

Ready to explore how philanthropy can fit into your financial strategy? We’re here to help. Our team can work with you to develop a philanthropic plan that aligns with your values, maximizes your impact, and optimizes your tax strategy. Whether you’re interested in setting up a charitable life insurance policy, exploring donor-advised funds, or simply want to make your giving more strategic, we have the expertise to guide you.

Reach out to us today to learn more about philanthropic giving. Let’s work together to create the impact you’re looking for in your community and build a legacy that will endure for generations to come. Your generosity can change lives – let us help you make it count.

Sources

The Giving Report 2023: It’s Time for Change. 2023. Canada Helps. https://www.canadahelps.org/media/The_Giving_Report_2023.pdf.