Giving back through charitable investments
TFSAsSince their inception in 2008, TFSAs have proven to be successful savings vehicles for Canadians. Aside from saving, they can be used to fund charitable donations. In a 2009 Investor Economics/Ipsos Reid report, it was indicated that the usage of TFSAs was highest in the 55+ age group. This also happens to be the most philanthropic bunch.
Creating charitable TFSAs is simple. Since one person can hold multiple TFSAs, you may set up one account for charitable donations and others for personal investing. Once funds are withdrawn from the charitable account, there are no tax hits on the capital gains, and you reap the tax benefits of charitable donations.
Charitable donations can also be made through retirement vehicles such as RRSPs and RRIFs. Because these accounts are heavily taxed upon the owner’s death, a charitable gift can help to offset all or some of the taxes owing.
Life Insurance PoliciesLife insurance policies may also be used to fund charitable donations. Through this type of donation, you may be able to give more than you ever thought possible.
There are two ways to go about making donations through your life insurance policy:
- You may simply name the charity as the beneficiary of your policy. The tax deduction may be applied in order to offset taxes paid by your estate.
- You may also transfer the policy to your charity of choice and pay the yearly premiums on it. Each year, the premiums you pay are tax-deductible as long as you donate to a registered charity.
Charitable donations simplify estate planning, as listing the charity of choice as your beneficiary will ensure that the organization receives the gift without the regular associated fees and taxes of the estate. Charitable accounts and policies are a great way to ensure that your favorite causes receive funds with tax-free capital gains, while your loved ones enjoy the benefits of charitable tax deductions!