Ontario Nature Fact Sheets

Individual gifts to local conservation organizations

If you are like most people, when you hear the word donation, a gift of cash is usually the first thing that comes to mind. However, there are many other creative ways you can support your favourite causes or groups. You can:

• volunteer your time and expertise, whether this be carpentry, computer skills, or being part of a clean-up crew for a local woodlot or stream.
• give talks and write letters to your elected officials.
• buy and sell raffle tickets and participate in the dinners, dances and other events put on by your favourite groups.

Of course, most groups welcome your membership and donations, whether as a one-time or an annual gift. You can also make a special and substantial contribution to the groups of your choice through what is often called a planned gift.

This factsheet looks at a number of creative options that are available to you to make a planned gift to a group you want to support.

Planning your gift

The terms planned gift and deferred gift simply mean a major gift that you plan in advance. It may be a gift of:

• money, securities or other capital property
• land
• life insurance
• a charitable gift annuity
• a charitable remainder trust
• or some other creative alternative.

Planned gifts offer you a way to turn your assets into a more substantial gift than you probably thought possible. They may significantly reduce your personal income taxes and help protect the value of your estate from taxes.

Changes to Canada’s tax rules allow you to claim larger income tax credits than ever before for your charitable donations. For gifts through a will, or where Environment Canada certifies a gift of land as "ecologically sensitive lands," the charitable tax receipt can be used against up to 100 per cent of your net income in the year of the gift. For most other gifts, the limit is now 75 per cent of your net income in the year of the gift. Any gifts valued above these limits may be carried forward and used up to five years in the future.

When considering a planned gift, first think about the needs of your family and other loved ones. Discuss these needs with a lawyer and/or an accountant. It is also very important to talk over your proposed gift with the group you intend to support. The designated group may be able to provide helpful suggestions for you to discuss with your lawyer and/or accountant. This group may not have yet had the opportunity to use the planned giving option that you are considering, and by exploring it with them, you will also help them become familiar with it.

Below is a short description of some of the planned giving options you may wish to consider.

A gift through a bequest

A charitable gift through a bequest in your will is the most common form of planned giving. You can specify a specific amount, designate a percentage of your estate, or allot other bequests and designate that the remainder of your estate be given to the group of your choice. This type of gift can provide substantial support for the group of your choice and substantial savings on your final tax return, since a tax credit can be used for the full value of your gift.

A gift of securities and other capital property

Whether through your will or at some other time, most groups also welcome gifts of publicly traded securities (stocks, bonds, futures or warrants listed on a prescribed tax exchange). Since only 37.5 percent of the capital gain on gifts of appreciated stocks and bonds must be brought into your income, you can significantly reduce your capital gains on such a gift. Most groups are also pleased to accept gifts of other capital property, such as artwork, rare books, coins and jewellery. Such items must be independently appraised and then the group can issue you a tax receipt for the full appraised value.

A gift of land or a conservation easement

Donating a gift of land can be a very rewarding way of supporting your group of choice and, depending on your objectives, can also be a way of ensuring that the natural features of your land continue to be protected. A gift of land can be structured in a variety of ways, including an outright gift of land during your lifetime, a bequest, or a conservation easement. A gift of real property can be donated and then held in trust until you or your spouse, friend or other relative passes on, or ceases to use the property. Or, through a conservation easement, you and the group of your choice work together to develop restrictions on the use of your property which are then registered on title and apply not only to you during your lifetime but to all future owners as well. The group takes on the responsibility of enforcing these restrictions.

There have been substantial income tax changes regarding capital gains on gifts of land–that is, the increase in value of your land above the original purchase price. For tax purposes, land that you donate is considered a disposition just as if you had sold it. However, income tax on the capital gain of land you donate can now be reduced or eliminated. You can use tax receipts based on the 75 per cent general limit plus 25 per cent of the taxable capital gain. You also have the option of claiming the gift below the fair market value. As well, farmers and homeowners have special capital gains exemptions available. Before donating land, it is important that you discuss your plans with your lawyer and/or accountant.

If you are considering a gift of land as a way of protecting its natural features, you also need to discuss it with the group to whom you are intending to give it. This allows you to ensure that it fits within their criteria for protected status and that they understand and can fulfill your expectations for future care of your property. If your intention is to protect your land, then the group will also likely ask you to consider an additional gift of money. Gifts of land come with ancillary costs such as appraisals, surveys, severances, legal fees, and ongoing costs for such things as fencing, signage and liability insurance. A responsible group will want to ensure they have the funds to care properly for your land.

A gift of life insurance

To make a substantial gift for a modest current expense, a gift of life insurance is an excellent option. Either an existing or a new policy can be considered. If you take out a policy designating the group of your choice as the owner of the policy and your beneficiary, your premiums are tax creditable. If you have an existing policy and decide to change the beneficiary to the group of your choice, your charitable tax receipt will be based on the present value of the policy. If not yet paid-up, future premiums are tax creditable as well. The value of the policy is then transferred directly to the group upon your death, and is not included in your estate for probate fees or income tax purposes.

A charitable gift annuity

A charitable gift annuity is a way for you to support the group of your choice and still ensure that you receive an income. Through a charitable gift annuity, you donate a sum of money or other property to the group of your choice. With your gift, they purchase an annuity from a commercial insurance company that provides you with a specified income throughout your lifetime. This can substantially reduce your income tax, since Revenue Canada considers the income payments from the annuity to be a blend of capital and interest and only the interest portion is subject to income tax. In a gift plus annuity, the group uses a portion of your contribution to purchase an annuity for you and the balance is directly donated to the group, for which they issue you a tax receipt.

A gift through a charitable remainder trust

A charitable remainder trust is another option if you wish to make a substantial gift to the group of your choice, and still have income from your assets during your lifetime. Under a charitable remainder trust, you transfer your assets to a trust (the trustee is usually a trust company) and the income from your assets is paid to you during your lifetime. Upon your death, the assets are transferred to the group of your choice and are not included in your estate for probate fees. You will receive a charitable donation receipt in the year in which the gift was made, the amount of which will depend upon age and life expectancy.

A few final words

Including gift planning in your financial planning gives you the opportunity to be creative in deciding how your assets can be used to support the causes and groups you most care about, and still ensure that you take care of your loved ones. Remember that for a planned gift to go smoothly, it is important you involve your loved ones, your lawyer and/or accountant and the group you want to support in your gift planning. Even those who are not considered wealthy have some assets, and these can make a real difference with some creative gift planning. You may be surprised at what you have to give!

The other factsheets in this series are Incorporation and Charitable Status and Dealing with Liability.

Ontario Nature gratefully acknowledges the financial assistance of the Tip of the Mitt Watershed Council (Great Lakes Aquatic Habitat Fund) in the production of this factsheet series.

This factsheet or information from it may be reproduced provided credit is given to Ontario Nature.