Are You Richer Than You Think? If So, It's Time To Think About Who Is Going To Get Your Money

Canadians give only 0.52 per cent of their income to charity , according to tax data from the Canada Revenue Agency. Keep in mind this only speaks to a percentage of income as we don’t have any true data on the percentage of net worth that is given to charity.

But when I say “only 0.52 per cent,” I recognize Canadians don’t have to give anything to charity . After all, charity begins at home; family members are in need. Some even say you can’t trust charities to properly spend their donations anyway.

Here is the problem: I see estate plans all the time that show likely estate values of $10 million plus and the question I always ask is, “Is this large estate value a good thing to you?”

The answers may surprise you. Some say it is great. Others say it is too high and they need to start spending more. Some say that is too much to leave to their one or two or three kids. In some cases, they say their kids already have too much money or they don’t have children.

Regardless of the response , I ask if charitable giving is part of their goals. It is for some and it isn’t for others. Everyone is entitled to their own view on the subject.

But the potentially large size of some estates should start a serious discussion about charitable donations , including annual giving, major gifts and legacy or estate giving .

Many people don’t realize that the cost of giving a dollar to charity can range from pennies to about 60 cents since if you give a dollar to charity, you will lower your tax bill by a minimum of 40 cents to more than 90 cents.

How can that gap be so wide? Here are the basics:

• Gifts of cash, once you get above $200 in a year, receive a tax credit of between 40 cents and 58 cents depending on the province and taxable income level, so a cost of between 42 cents and 60 cents per dollar of cash donation.
• Gifts of securities with a high percentage of unrealized capital gains can lower the cost down to about 25 cents to 35 cents depending on the capital gains and province.
• Flow-through shares for donations can lower costs less than 10 cents depending on the province and income.
• Gifts of life insurance are measured differently, but can also be a very low-cost way to donate to charity. It can be a good way to guarantee a sizable amount down the road that one can’t afford to gift today, and the annual premiums qualify for a full charitable tax receipt.

North York General Foundation, the charitable arm of the similarly named hospital in Toronto, is helping people better understand how different levels of charitable giving would specifically impact their estate value and lifetime tax bill through an online estate and donation planner calculator . (Full disclosure, our firm has worked with them on this project.)

“We speak with many donors who underestimate how much of an impact they can have while they’re still around to see it,” Laura Cuthbertson, chief development officer at the foundation, said. “When someone can see clearly that a gift won’t put their financial security at risk, it changes the entire conversation from ‘Someday, in my will’ to ‘What can I do now?'”

Understandably, not everyone is able to or prioritize giving to charity, but my sense is that many would give a lot more if they saw how much they could easily afford to give. It certainly makes the decision easier when you’re educated on the various ways to do so more effectively.

Giving to charity earlier may also have meaningful advantages for you over waiting to leave it all in a will.

For one thing, you get to see the impact of your donations and you might have a more significant impact on how they are being used.

You can also generally give up to 75 per cent of your annual income to charity — up to 100 per cent of your income in your final year — and receive a tax credit. Sometimes people leave large amounts at the end and never benefit from the tax credit that they could have used throughout their lifetime.

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And having a greater understanding of your financial future through estate planning gives you greater confidence to give more while you’re still alive and still be confident you will never run out of money.

Another factor impacting decisions on charitable giving is the decreasing birth rate. In 2008, the Canadian birth rate was 1.7 per woman and that dropped to 1.43 in 2021. Statistics Canada once asked those aged 15 to 49 how many children they wanted to have and 33 per cent said they intended to not have any.

One-child families are the most common type in Canada, comprising 45 per cent of families with children in 2021, according to the 2021 census.

Between greater education on future finances, greater understanding of ways to make charitable giving cheaper and the declining birth rate, my guess is that there will be greater interest in planned giving and charitable giving in the years ahead.

Ted Rechtshaffen, MBA, CFP, CIM, is president, portfolio manager and financial planner at TriDelta Private Wealth, a boutique wealth management firm focusing on investment counselling and high-net-worth financial planning. You can check out their 2026 Canadian Retirement Income Guide through www.tridelta.ca.