1. CAGP-ACPDP Conference Planned Giving Presentation ROBERT KLEINMAN FCA Mr. Prospect Thursday, May 13, 2010 9:30am

2. LEAVE A LEGACY The legacy The movement of the use of assets to community purposes at death

3. THE LEGACY DECISION TREE

4. WILL BEQUEST The will is an expression of final intentions Charitable gifts Designated for institution Designated for use Endowment, expense, equipment? Family philanthropy

5. LEGACY WILL METHOD Complete will change or first will to be drawn up Codicil Concern over deductibility if institutions not spelled out- leave to JCF with trustees Leave to JCF with a side contract-easier to change your mind Is mandate necessary?

6. TAX EFFECTS OF THE WILL 2 INCREDIBLE PROVISIONS Will gift deemed to have been made in the year of death Donation limit in the year of death (and preceding year) 100% of income

7. TAX PLANNING Anticipate taxable income on death Tax shelter? Will gift!!!! Taxable income $200,000 Will gift $200,000 No tax

8. GIFT ON DEATH INTENTION No tax need Consider life income plans Why? Effective gift on death Receive tax help now

9. CHARITABLE REMAINDER TRUST Transfer property to a trust today Income beneficiary during lifetime- donor (+spouse) Capital beneficiary – Lifetime- none – Upon death- charity

10. CHARITABLE REMAINDER TRUST Tax receipt today PV- (capital,mortality, interest) Ex. $100,000 male age 78 PV- ($100,000,8.1 years,4.5%) =$70,010

11. LIFE INSURANCE Leave a larger gift Or to replace the gift capital for family Traditional Charity owner + beneficiary Donor donates premiums

12. REPLACEMENT INSURANCE Donate $300,000 RRSP’s Life insurance to estate $300,000 No gift RRSP’s worth $150,000 to family Insurance proceeds of $300,000 less cost of premiums,say $75,000

13. NEW INSURANCE PRODUCTS Corporate-owned Borrow from a bank for premiums and interest At death proceeds pay off loan Excess used to fund will gift CDA substantial

14. ESTATE PLANNING A co. Life Insurance JCF proceeds Mr. A Taxable Income: $1,000,000 Will Gift: $1,000,000 Tax $0.00 Tax Savings:$480,000 Insurance Cost: ?

15. ESTATE PLANNING - Illustration Corporation to purchase $1,000,000 life insurance policy on last to die basis On last to die, donors leave $1,000,000 in their wills to JCF At the second death, the corporation will receive $1,000,000 tax free The corporation will remit $1,000,000 tax free to the estate to pay will gift The deceased final tax return will utilize a $1,000,000 tax receipt from the JCF, saving $480,000 of tax

16. ESTATE PLANNING - Illustration

17. The cost of life insurance, at present value is With no life insurance purchase, the corporation would transfer to the estate $354,476 on which the estate would pay 24% tax, leaving the estate with The estate will save $480,000 on the deceased final tax return which, at present value represents The net cost of creating $1,000,000 of charity is a saving of $354,476 $269,402 $283,039 $13,637

18. PREFERRED SHARES $1 million of preferred Gift to JCF Insurance on children Saves $500,000 in cash flow Continuation of estate freeze

19. PREFERRED SHARES Aco Bco Aco subscribes for preferred shares of Bco JCF Bco Owns preferred shares of Bco Gift to JCF:$2,000,000 Tax Saving:$1,000,000 Insurance Cost: ? Insurance policy B co. could lend back to A co. at X% int. Gift to JCF

20. PREFERRED SHARES- Illustration CASH FLOW FOR DONOR – Gift of preferred shares – Insurance premiums – Tax savings – Net cost for donor BENEFIT FOR ESTATE – CDA benefit – tax savings on taxable dividend TOTAL NET FOR DONOR’S FAMILY Life expectancy 25years, interest 4.5% $2,000,000 $(402,882) $1,000,000 $ 597,118 $ 218,638 $ 815,755

21. MARKETABLE SECURITIES Tax Advantages Example: Mr. Jones donates $100,000 of Royal Bank of Canada stock to the JCF His alternative is to sell the stock and donate $100,000

22. SALE vs. GIFT Stock SaleStock Donation CombinedFederalQuebecCombined Proceeds$100,000 Cost$50,000 Capital Gain$50,000 Taxable Capital Gain$25,000 Special Exemption($0)($25,000) Net Income$25,000$0 Income Taxes Payable $12,000$0 Tax Receipt$100,000 Tax Savings$48,000$24,000 $48,000 Net Tax Savings$36,000$24,000 $48,000

23. Example: Holdco makes a gift of $500,000 worth of securities to the JCF. Adjusted cost base = $0 Capital Gain = $500,000 Tax Implications: Since for Federal and Quebec purposes there is no taxable capital gain, the full $500,000 flows through to Holdco’s CDA and can be paid out tax free to the shareholders of Holdco. MARKETABLE SECURITIES CORPORATE GIFTS

24. MARKETABLE SECURITIES POST MORTEM TAX PLANNING Deemed disposition of all assets on death. Gifts made in the will are deemed to be made in the year of death. Full amount of donation receipt to be applied to reduce taxes in the year of death. Reduce death taxes by donating marketable securities.

25. POST MORTEM TAX PLANNING CONTINUED Example: Value of estate: $2,000,000 ACB of assets: $500,000 Estate includes marketable securities: $500,000 ACB of Securities: $250,000 Taxable: $750,000 Solution: Will gift of marketable securities

26. POST MORTEM TAX PLANNING CONTINUED Will to provide that on death – marketable securities to be gifted to the JCF. Effect: Estate gets tax receipt for $500,000 applied to reduce taxes on $750,000 to $250,000 in year of death. For Federal and Quebec purposes, the entire capital gain of $250,000 is not taxable. Estate can make a significant gift at relatively low cost.

27. MARKETABLE SECURITIES FLOW THROUGH SHARES Donor may purchase resource (mining or oil and gas) partnership units, convert the units into shares and then donate these shares to a charity.

28. Flow- thrus Public ruling Combination of 2 incentives Popular today

29. example Acquisition$211,423 Federal 211423 x.242251,207 Quebec 211423 x 150% x.2476,112 Federal credit.15 x 21142331,713 Income inclusion 31,713 x.2422-7,681 Donation 117,457 x.482256,638 Net cost$3,434 Charity receives $117,457 Fees to sell 17,457 Net charity$100,000

30. issues Must do exploration Value of receipt- high fees Need lots of taxable income- AMT

31. corporate 100% write off only CDA account huge Cost 20 cents After cda value -negative