More Than a Tax Strategy: Building a Legacy Through Giving

Seven years ago, while preparing for a home renovation, I learned never to underestimate how long it takes to empty a family home. Among the family treasures, I found a box of handwritten thank-you letters addressed to my dad from children around the world.

I found this peculiar. My dad was never known for being great with kids. He never coached a team or chaperoned a school trip. I do not even remember him attending my childhood birthday parties. Dad owned a restaurant, and while I was learning to throw a baseball or heading off on school trips, he was working long hours. Looking back, it was probably unfair of him to volunteer for extra shifts and leave Mom alone with eight sugar-fuelled children.

The mystery was solved when I found old tax returns nearby. Tucked inside were donation receipts from several children’s charities. My father had quietly sponsored children living in difficult circumstances around the world. He began giving about a decade after arriving in Canada and continued for nearly fifty years.

Dad was many things to our family: a strict math tutor, an excellent pie baker, an avid reader and a prolific writer of short stories. Yet I never associated him with philanthropy. He did not discuss his giving, seek recognition or expect praise. The letters revealed a part of him I had never known.

Over the last three decades, I have had the privilege of helping clients pursue their own charitable goals. These conversations sometimes begin with a simple request for cash. When the cash will come from selling an investment that has grown substantially, however, it is worth pausing to consider whether there may be a better way to give.

Give the Investment, Not Just the Cash

A cash donation to a registered charity can generate a non-refundable tax credit. But if the cash comes from selling an appreciated investment, the sale may also create a taxable capital gain. For eligible publicly traded securities, donating the investment directly instead of selling it first may be more tax efficient. The donor generally receives a charitable receipt based on the fair market value of the gift, while the capital gain on the donated security may qualify for a zero inclusion rate.

In plain language, more may reach the charity, and less may be lost to tax. The exact result depends on the donor’s income, province, investment and overall circumstances, so the strategy should be reviewed with tax and legal advisors.

When Tax Planning Becomes Something More

Recently, our team worked with a widow who has been a client for many decades. Her income from RRIF withdrawals, dividends, interest, capital gains, CPP and a workplace pension was approaching $250,000 a year. Her concern was straightforward: if possible, she would rather direct more of her money to meaningful causes than to taxes.

Because charitable giving was already important to her, we explored a $100,000 donation. Depending on her circumstances, a gift of that size could generate charitable tax credits of approximately $45,000 to $50,000. We encouraged her to confirm the estimates with her accountant before proceeding.

The tax savings mattered, but the possibility of helping the charities she cared about brought the immediate smile.

A Gift Today, Decisions Over Time

We also discussed a donor-advised fund, or DAF. A DAF is a charitable giving account administered by a registered public charity. A donor makes an irrevocable contribution, receives a charitable receipt, and recommends grants to charities over time.

For this client, it offered the ability to make the $100,000 gift now, potentially donate appreciated securities in kind, keep the charitable assets invested, and decide gradually which organizations to support.

The Legacy She Saw

What excited her most was not the tax planning. It was the opportunity to involve her family.

Her adult children could help evaluate charities and discuss future grants. Her grandchildren could learn why certain causes mattered to the family. If one grandchild became passionate about an organization, they could research it together and decide whether it fit the family’s charitable goals.

The DAF could become more than an investment account. It could become a way to teach generosity, responsibility and community involvement, while creating conversations across generations.

That brought me back to the box of letters. My father never explained his reasons for giving, yet his quiet example endured. Our client has chosen a more visible path by inviting her family into the process. Both remind me that philanthropy is about more than tax savings. It is one way our values continue speaking after us.

The greatest return on a charitable gift may not be measured in tax savings or investment growth. It may be found in the people helped, the conversations started and the values carried forward.

If you would like to explore how philanthropy could become a meaningful part of your financial plan and family legacy, speak with your Mah Investment Group advisor.