A capital property donation may occur in a current year or at death, and in qualified circumstances a donor may be entitled to tax relief presently while retaining personal use of the property for life. This presentation looks at the considerations that inform a donor as to the optimal manner by which to structure a donation, and how life insurance can make that donation more effective. This material is presented for informational purposes only, and is not a legal, tax or investment opinion to be relied upon either by an advisor or by a client. Interested persons should seek retained independent professional advice before acting or foregoing action in relation to any of the matters mentioned herein. Donating capital property to charity Making philanthropy tax-efficient

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Charitable tax credit Gifts of capital property Residual & remainder interests Timing & control Role of life insurance Donating capital property to charity Making philanthropy tax-efficient

Donating capital property to charity Charitable tax credit Two-tier tax credit structure –Credit on donations up to $200 is at the lowest federal tax rate –Credit on donations over $200 is at the lowest federal tax rate –Corresponding provincial credits Offset up to 75% of net income Up to five years carryforward for unused credit In year of death –Offset up to 100% of net income –Carryback offset up to 100% of net income in year prior to death

Donating capital property to charity Gifts of capital property At any disposition, capital gains & recaptured depreciation are taxed –Gift is a deemed disposition When gift is made to a charity –May elect disposition value from ACB to FMV for both capital gain tax and charitable credit Capital gains inclusion rate –25% rather than usual 50% –Prescribed securities& funds, and ecologically sensitive lands No tax on principal residence

Donating capital property to charity Residual & remainder interests Current tax credit –Continue to use property for life Two common forms used –Residual interest in real property –Charitable remainder trust Qualifying as a gift –Identification, size of interests, vesting, & all conditions satisfied Valuing the interest - Actuary –FMV, life expectancy, interest rates & case-specific factors Using a testamentary trust

Donating capital property to charity Timing & control Lifetime donationDonation at deathRemainder/residual Value of donationFMV FMVPortion of FMV EvidenceEvidenceActuary Charitable tax creditCurrentAt deathCurrent % % % ControlTo CharityDonor for lifeDonor for life Immediately &Revocable to Irrevocable to irrevocablycharity at death charity at death Ongoing costsCharityDonor for lifeShared

Donating capital property to charity Role of life insurance Value recovery for residual beneficiaries –Replenish the estate Maintenance for surviving spouse –Support surviving spouse for life Leverage the charitable gift –In effect, donate twice