Gifts of cash

Cash contributions-paid by cheque or credit card - are the choice of many donors to The Anglican Church of Canada. A cheque is considered to have been given on the day it was mailed, and a gift by credit card on the date the obligation was incurred.

The Canada Revenue Agency's (CRA) charitable donation tax credit means that your gift is worth more to the Church than its actual net cost to you. Each year a percentage of the value of your accumulated donation receipts can be subtracted from the federal income tax you owe and reduce your provincial taxes as well. Depending on your provincial rate, the combined tax savings can be as much as 45 percent of the amount contributed.

Sally T. writes a cheque for $1000 to her church, but the net cost of the gift to her is only $550, because her donation receipt for $1000 reduces her income taxes for that year by $450.

The maximum amount of contributions creditable in any one year is 75 percent of your net income. Any unused contributions can be carried forward and used in any of the next five years, again subject to the annual contribution limit.

Gifts of appreciated property

Non-cash assets, such as publicly traded listed securities, real estate and works of art are also suitable as outright gifts. Beginning in 2006 there is a special incentive to encourage gifts of listed securities: the amount of capital gain included in income and subject to tax is reduced to nil. This means that none of the capital gain is taxed when listed securities are contributed. (Note: Listed securities include stocks and bonds traded on Canadian and many foreign exchanges and also mutual fund units. To qualify for the special tax treatment, the securities must be contributed in-kind to a public charity, such as The Anglican Church of Canada or your parish church.)

Although none of the gain is subject to tax, you receive a donation receipt for the full fair market value of the securities. Thus, a contribution of securities always results in net tax savings.
When you give appreciated property, your limit actually exceeds 75 percent of net income, for you may claim up to 75 percent of your income from all other sources plus 100 percent of the taxable gain in your gift. Because of these provisions, you can always be assured that your donation tax credit will exceed tax on the gain in the gifted property, as the following example demonstrates.

Henry B. donates listed stock valued at $50,000 that he had purchased for $10,000. His capital gain is $40,000, and is not taxable. Even with his 45-percent combined tax rate, there is no tax on the gain. However, his contribution results in a tax credit of $22,500, which leaves him with a donation having a net cost of only $27,500.

Suppose that Henry had sold the stock instead of contributing it. The taxable portion of the gain would have been $20,000 (50% x $40,000), and the tax on this gain would have been $9,000 % x $20,000). His after-tax sales proceeds would have been $41,000. Thus, the cost of making a $50,000 gift is only $13,500 (the difference between after-tax proceeds in the case of a sale and the net tax savings in the case of a gift).

To make your planned gift, please contact the Diocesan Gift Planning Consultant.

Gifts of Publicly Traded Securities

Tax Advantaged Gift Planning Strategies
Anglican Diocese of Ottawa

A charitable gift of publicly traded securities such as stocks, bonds and mutual funds made directly to your church, either now or as a bequest in your will, offers significant income tax savings which can reduce the actual cost to you of such a charitable gift. Direct gifts of such securities result in no taxable capital gain compared to a taxable capital gain of 50% if sold and the funds donated.

Planning Opportunities Using Listed Securities

1. When it's time to sell
You may own securities you don't think will perform in the future as well as they have in the past, or maybe you expect a correction in the entire market. Nevertheless, you hesitate to sell because you don't want to pay tax on the gain. If you have been planning to make a charitable gift, these securities could be the ideal asset to use for that gift. The net cost of the gift could be relatively low. Consider this example.

Example: Charles M. thinks it is time to sell some stock now valued at $10,000 with an adjusted cost base of only $2,000. He has also been thinking of making a $10,000 gift to his church. What is the real cost of giving the stock instead of selling it?

It costs Charles only $5,500 to give stock worth $10,000. Had he given $10,000 cash and sold the stock, the gift would have cost him $7,300. That is because he would have paid $1,800 more tax on the capital gain.

2. When it's time to hold

Unlike Charles in the previous example, you may have a stock you think has a great future. While you like the idea of exempting part of the gain from taxation, you don't want to lose out on likely future appreciation. Thus, you are more inclined to hold the stock and make this year's charitable gift with cash.

If you have such a stock, you might consider giving it and using the cash, which you otherwise would have given, to repurchase the stock on the market. Thereby, you would get a stepped-up cost base in the stock, and when you sell it in the future you will be taxed only on the gain accruing after the repurchase.

3. Bequest of Securities

The partial exemption from taxable gain applies to charitable bequests as well as to lifetime gifts. Thus, if you intend to make bequests to charity as well as to family members, it could be advantageous to fund your charitable bequest with appreciated, listed securities and your family bequests with other assets. You can do this either by making a specific bequest of certain securities, or by empowering your executor to select the assets for the charitable bequest.

Suppose, for example, that your estate consists of your principal residence, plus cash, plus $100,000 of listed stock with an adjusted cost base of $40,000, and that you want to leave $100,000 to charity and the balance to your children. If the stock goes to the children, $30,000 of the gain (50% x $60,000) will be taxed, but if it goes to charity none of the gain will be taxed. Better, then, to give the charity your stock and the children your cash and principal residence, neither of which is taxable.

To make your planned gift, please contact the Diocesan Gift Planning Consultant.

Charitable / Commemorative Gifts

Tax Advantaged Gift Planning Strategies
Anglican Diocese of Ottawa

The Commemorative Gift: A gift to honour another!

One of the greatest satisfactions in making a charitable gift is the opportunity to pay tribute to someone who has touched us in a special or significant way. Commemorative gifts - in memory of someone deceased or in honour of one still living - are perennially popular and appropriate. Through such a gift you may honour a family member or perhaps recognize a mentor or friend who has greatly shaped your life. At the same time your gift expressed your own commitment to the future of your community and provides valuable support for the ongoing ministries that are important to you.
Outright Gift

Various giving techniques may be used in making a commemorative gift, and each yields certain tax benefits. If you have available resources and would like to see your gift go to work at once, consider an "outright gift." Here's an example:

Mary B.'s mother recently passed away and she wants to do something special to pay tribute to her memory. She contacts the church where her mother volunteered for many years, and learns that it is seeking funding to decorate and furnish a conference room in a renovated parish centre. In memory of her mother, Rose contributes $25,000 for this project. The useful and attractive room will perpetuate her mother's memory, and Rose will receive a donation receipt for the full amount of her gift. Assuming a federal/provincial tax credit of 48 percent, that can yield income tax savings of as much as $12,000.

Mary designated an immediate use for her gift. Other donors may prefer to direct their commemorative gifts to the parish's endowment, where the gift principal remains intact and only the interest earnings are used, either for a purpose designated by the donor or for the Church's general purposes. A "named endowment" is a particularly appropriate way to ensure that the name of the person honoured will be remembered far into the future.

Life Income Gift

Another technique that may be used to make a commemorative gift is the "life income gift," which provides lifetime payments to the donor as well as a gift to the Church. Examples are the charitable gift annuity and the charitable remainder trust.

Carl H., a retired parish priest 74 years of age, wants very much to endow an annual grant for an indigenous training programme in the North in honour of his long-time mentor and friend who is now a retired bishop who served for years in a Council of the North diocese. Because he depends on the income from his assets, Carl contributes $75,000 for a charitable gift annuity. For the rest of his life, he will receive payments of $5,916 per year and 84% of this amount will be received tax-free. Carl is also entitled to a donation receipt of $18,750, reflecting the gift portion of his contribution that will be used to establish the (Named) Fund.

Bequest

A third technique for making a commemorative gift is the bequest.

Roger B.'s wife died last year, but he is deeply grateful to the parish where she found wonderful pastoral care and support from the clergy and lay leaders. As he updates his will, Roger includes a bequest of $100,000 to his parish church, where it will be used to establish an endowed fund in his wife's name. Income distributions from the fund will honour her memory and enhance an already effective pastoral ministry programme. At Roger's death, his estate will receive a donation receipt for the full amount of the gift. The tax credit will offset taxes on other income, including capital gain, which must be reported on his final return.

We're here to help you

Mary, Roger and Carl have discovered the satisfaction that comes from honouring a friend or loved one by means of a commemorative gift. You can discover it, too - through The Anglican Diocese of Ottawa. We'll gladly provide you with further information on the various ways of making a commemorative gift and our policies on named endowments. We would be pleased to discuss with you possible uses for your gift and appropriate recognition for the one in whose name it is given. Through your Parish Church, The Diocese of Ottawa or The Anglican Church of Canada your tribute to one person will touch the lives of many others!

To make your planned gift, please contact the Diocesan Gift Planning Consultant.

A Gift of Life Insurance

Tax Advantaged Gift Planning Strategies
Anglican Diocese of Ottawa

Life insurance is a simple idea that takes many shapes.
Its basic purpose, of course, is to provide cash to meet the needs of survivors at the insured person's death, and all policies provide this benefit. However, life insurance policies may also build up cash value that can be utilized for a variety of purposes. A particular policy may be intended primarily for protection through its death benefit, or it may be designed more for investment purposes through increasing cash value.

Some general types of policies:

Any of these policies can fill an important niche in one's financial plan. As time passes, however, its original purpose may become less important. As children grow up and we accumulate other resources, the need for family protection decreases. Policies purchased to provide cash for estate settlement are less needed since the Succession Duty and Estate Tax have been repealed. Policies with a face amount that seemed large in pre-inflation days may seem insignificant today.

New ways of looking at life insurance

As time goes by, our priorities change. We find ourselves wanting to share our good fortune with those around us, to show our support of the causes and institutions we believe in, to leave the world a little better than we found it. When goals such as these take shape, the life insurance policy that served us well in years gone by can serve us in an entirely new way when we make a charitable gift. In other cases, a new policy can be the key to achieving philanthropic goals. Here are some possibilities:

Give the death proceeds. Marvin Holcomb no longer needs the $25,000 death benefit from the policy he took out years ago when his family was young. So he decides to have his Parish Church receive the proceeds payable at his death. When he dies, his estate will receive a donation receipt for the amount of the death benefit, resulting in significant tax savings on his final return. If the donation receipt exceeds 100% of his income in that year, the excess can be carried back to the previous year, and the 100% limitation will apply to that year's income as well.

Give the policy itself. Nancy Helm, age 75, had almost forgotten her paid up $50,000 policy until she began thinking about establishing an endowment with the Diocese of Ottawa in memory of her husband. She depends on the income from her other investments, but the insurance policy makes an ideal gift. Because she makes the Diocese of Ottawa the beneficiary and also the owner of the policy, her gift is irrevocable, and she receives a donation receipt for the cash value of the policy, creditable up to 75 percent of her income (excess credit may be carried forward up to five years). Nancy's policy is paid up, but if premiums were still owing and she continued to pay them, she would receive donation receipts for those payments as well. Give a new policy. Ralph Swanson, in his mid-40's, would like to make a significant gift to The Second Century Fund of the Diocese of Ottawa. He has no existing policy or assets to contribute but he does have some discretionary income, so he purchases a new $40,000 policy naming The Second Century Fund as both owner and beneficiary, and pays for it in five annual payments of $1,200 each. He receives a donation receipt for each payment and, assuming a combined federal/provincial tax credit of 48 percent, his annual tax saving is $576. Thus his "net cost" for each premium is $624, and he makes a $40,000 future gift for only $3,120.

There are other ways, too, in which life insurance can enable a donor to make a significant charitable gift.

Using life insurance for wealth-replacement. Marion and George Walters, both age 60, want to contribute $100,000 to General Synod for work in the North without diminishing their legacy to their children. Assuming a tax credit of 48 percent, they realize tax savings of $48,000 over several years by making the gift, so they plan to use a portion of these savings to purchase a "second-to-die" policy that will add $100,000 to their estate when the surviving spouse dies.

Using annuity income to make a life insurance gift. Maurice Laurent, 68 years old and in the 48 percent combined tax bracket, has $100,000 in bonds and GIC's from which he receives after-tax income of $350 per month. He uses this asset to purchase a commercial annuity that provides him after-tax payments of $830 per month. He then allocates $300 of this increased cash flow each month to pay the premiums on a $100,000 life insurance policy that he purchases in the name of the General Synod of The Anglican Church of Canada. He receives a gift receipt for every premium paid, and at his death, the insurance proceeds will be his gift to the Anglican Church.

To make your planned gift, please contact the Diocesan Gift Planning Consultant.

A Gift of a Stripped Bond

Tax Advantaged Gift Planning Strategies
Anglican Diocese of Ottawa

For many years, governments and corporations have borrowed money from individuals by issuing bonds. As the lender, you purchase the bond at its "face value" and then receive interest at a fixed percentage until the bond "matures" and the face amount is refunded to you. (Bonds may also be bought and sold on the "secondary market" at current market prices; in that case you receive the stated interest for whatever time you own the bond.)

A stripped (or zero coupon) bond is a financial product sold by bond and securities dealers. Basically, it is a corporate or government bond from which the interest coupons have been stripped away. Instead of paying income to the holder, it is sold at a discount for much less than its future redemption value.

An individual who buys and holds a stripped bond must pay income tax each year on the growth in the bond's value. However, when the bond is purchased and gifted to a church, neither the buyer nor the church is taxed, so its value increases tax-free ñ often doubling or tripling before it matures.

For example:
Albert Bathgate wishes to establish a named endowment with General Synod of The Anglican Church of Canada in memory of his wife. For $15,000, he purchases, in General Synod's name, a stripped bond which will mature in 10 years at a face value of $30,000. He receives a donation receipt for the full cost of the bond and, assuming a combined tax credit of 48 percent, realizes tax savings of $7,200 (48% of $15,000). He has made a future gift of $30,000 to The Anglican Church at a net cost of only $7,800 ($15,000 - $7,200)!

Selecting a bond to fit your goal
The cost of the stripped bond you purchase for General Synod (or your parish, diocese, The Primate's World Relief and Development Fund, or the Anglican Foundation of Canada) will depend on the years to maturity and the amount you want the Church to receive. Bond prices and yields fluctuate virtually every day. Contact an investment broker to obtain the most current stripped bond rates.

If you intend to use your stripped bond to establish a named endowment, as Albert Bathgate did in the example above, its present value must equal or exceed the established minimum for a new named fund. For a gift to the general endowment or a previously-established named fund, a bond of any size may be used.

Purchasing a stripped bond

Virtually any investment broker can provide a stripped bond, though you may wish to secure quotations from more than one to ensure that the pricing is efficient. You may consult your own dealer or ask us for suggestions.

If you have an account with the broker, you may use it to make your purchase and instruct the broker to register the bond in the name of The General Synod of The Anglican Church of Canada (or other Anglican entity) and deliver it to us. Alternatively, you may give us a cheque for the required amount and we will purchase the bond. The settlement contract with the broker or your cheque to General Synod will be the basis of your tax receipt.

To make your planned gift, please contact the Diocesan Gift Planning Consultant.

Gifts of Registered Retirement Funds

Tax Advantaged Gift Planning Strategies
Anglican Diocese of Ottawa

Charitable gifts with retirement funds

A charitable gift is one method of assuring that all or most of the funds you spent a lifetime accumulating are used for the purposes you choose.

If a spouse survives you, he or she would ordinarily be the beneficiary of your retirement funds. If you had an RRSP, your surviving spouse could keep the funds in a tax-deferred plan. If you had already converted to a RRIF, your surviving spouse could continue to receive payments, and they would be taxed only as received. If you had opted for a joint-and-survivor annuity for you and your spouse, he or she will receive payments for the balance of his or her life. In the event underage children survive you, the retirement funds can be rolled tax-free into an annuity paying them installments until age 18. If the dependant is disabled, a tax-free rollover to an RRSP, annuity or RRIF is permitted.

Possibly, however, you will not be survived by a spouse and have already made arrangements for the children. In that case, leftover retirement funds make an excellent charitable gift because the charitable tax credit will offset the tax on the distribution. Leaving the funds to a beneficiary, who is not a spouse or dependant child or grandchild, generally would cause the full value of the funds to be taxed in the year of your death, but with the charitable gift you preserve the funds intact for a church or charity whose work you want to support.

The recommended procedure is to designate the church or charity as beneficiary of all or a portion of your RRSP and RRIF funds.

Example: Barbara T, a single woman, dies at age 75 and leaves $30,000 of her RRIF funds to the Anglican Foundation of Canada.

Tax on RRIF funds (48% combined rate)	$14,400
Tax credit (Combined credit is 48% of gift and entire bequest is creditable.)	$14,400
Net tax on distribution	0

The tax credit will entirely offset the tax on the distributions. That is because the creditable amount of a charitable bequest is 100 percent of net income. Thus, if you choose to leave your leftover retirement funds for church or charity, no part of them will be consumed by taxation.

To make your planned gift, please contact the Diocesan Gift Planning Consultant.

A Charitable Gift Annuity

Tax Advantaged Gift Planning Strategies
Anglican Diocese of Ottawa

A gift annuity is an arrangement under which you make a contribution to a church or charity and receive, in turn, guaranteed payments for life. The amount of these payments depends on your age and the size of your contribution, but they will likely be significantly higher than you are receiving from your present investments, and the annuity arrangement is guaranteed. It will continue as long as you live, no matter what happens to the economy or interest rates. If you are married, you may choose a joint-and-survivorship annuity which continues as long as either spouse lives.

Your gift annuity brings you a special bonus at tax time: a sizeable portion of your payments will be tax-free. While older annuitants will receive payments that are totally tax-free, all donors are entitled to a donation receipt that will result in a tax credit.

Advantages and benefits of a charitable gift annuity?

Attractive Rates. Mr. and Mrs. Smith, in their mid-70s, are receiving a modest income from their GIC. When the GIC matures in two months, they plan to obtain a General Synod gift annuity that will noticeably increase their annual, after-tax income.

Gift annuity rates are very attractive for older supporters of the Church. Depending on age, rates can vary between 5% and 10%. Many folks in their retirement years will be pleased when they compare their low investment rates with the current annuity rates offered by the Anglican Church of Canada.

Tax-Free Payments. Part of each annuity payment is tax-free. For example, Mrs. Jones, age 79, contributes $30,000 toward a gift annuity. Every year, she will receive $2,510 (8.4 percent), and $2,420 will be realized tax-free. (Depending on age, all or a generous portion of payments will be tax-free).

Tax credit. All donors will also receive a donation receipt, entitling them to an income tax credit. Mrs. Jones, above, receives a donation receipt for $7,500 for her contribution, which will reduce the amount of income tax she pays. Any excess may be carried forward into the next five years.

Fixed, Regular Payments. It's nice to be able to count on a specific amount of payment, no matter what happens to the financial markets. Your annuity payments will not change from year to year. And since gift annuity payments are backed up by the full assets of General Synod, you have assurance that your cheque will be direct deposited every payment date for the rest of your life.

Personal satisfaction. Perhaps the greatest benefit of a General Synod Charitable Gift Annuity is the personal fulfillment you receive by helping the Church as well as yourself. Your gift annuity assists a worthy cause that makes a difference in the lives of others. Your gift enables us to continue to provide essential ministry and programme throughout Canada and with our partners overseas.

There are additional reasons for obtaining a gift annuity with the Anglican Church of Canada. Some like the idea of reducing the size of their estate, thus lowering potential probate costs. Others like the ease and simplicity of the gift annuity transactions.

Consider some more examples:

John Slingsby, age 90, contributes $15,000 for a gift annuity with General Synod. He receives an annuity of $1,500 (10 percent) per year for life, of which 100% is paid out tax-free. He is also entitled to a donation receipt for $ 5,457.60 in the year he makes the gift. Upon his death, The Primate's World Relief and Development Fund will receive a substantial portion of John's original contribution.

Sharon and Dan Richards, ages 75 and 79, contribute $50,000 as a gift for the Anglican Foundation, and receive $3,504 per year (7.0 percent) for as long as either of them lives. The tax-free portion is $2,825 per year and the donation receipt is $10,000. Their gift will assist the Foundation in making grants and loans to parishes in Canada's north and providing support for special, creative programmes.

Mary Longworth, age 84, contributes $10,000 for a gift to her parish, and receives a lifetime annuity of $ 821.40 per year (8.214%), 100% of which is paid out tax free. She is also entitled to a donation receipt of $ 4,368.98. Her parish will eventually use Mary's gift for on-going renovations to the parish hall.

To make your planned gift, please contact the Diocesan Gift Planning Consultant.

Gifts of Residual Interest

Tax Advantaged Gift Planning Strategies
Anglican Diocese of Ottawa

It's like having your cake and eating it, too! You have the satisfaction of making a major gift to the Diocese of Ottawa now and receiving an immediate tax benefit, yet you continue to use and enjoy the gift property for the rest of your life!

It's known as a gift of residual interest with retained life use, and it usually involves your principal residence, other personal use real estate, such as a cottage or other personal use property such as works of art. In making such a gift, you transfer the property irrevocably to the Diocese of Ottawa but retain its lifetime use. If you wish, the arrangement can include use of property for your spouse's life.

When the transfer is made, you will receive a donation receipt for the present value of the "residual interest"-the value, in today's dollars, of the property the Church will receive at your death. This is calculated on the basis of the property's appraised value, your age, and an appropriate discount rate.

Giving your personal residence

You love the old house, but it's simply too big for your present needs. If you move to smaller quarters and donate the house to fund your trust, you will recognize no capital gain whatever, no matter how much it has appreciated in value. The trustee will sell the house and invest the full proceeds to earn new income for you, and at your death or the expiration of your trust, General Synod of The Anglican Church of Canada will receive a significant and very welcome gift.

Elise C., age 72, owns a home valued at $200,000. She wants to continue living in it for many years to come, but she would like the Diocese of Ottawa to have it at the end of her life. She decides to give the home to the Diocese of Ottawa , retaining a life interest for herself. She receives a donation receipt for $85,421 which, assuming a 48-percent combined tax credit, will reduce her income taxes by $41,002 over the next five years. (The portion of the donation receipt that she may claim in any given year is limited to 75 percent of her income, but she has the gift year and five additional years to use the full amount.)

Because Elise's house is her principal residence, she realizes no taxable gain at the time of the transfer, no matter how much its value has increased since she acquired it. During her continued occupancy, she will be responsible for maintenance and such other expenses as are specified in her gift agreement with the Diocese. If it becomes necessary for her to give up the house sometime before her death, she has several options. She may rent the house and retain the rental income, give her life interest to the Diocese and receive an additional donation receipt, or, by agreement with the Diocese, sell the house and receive a share of the proceeds based on the value of her life interest.

Giving other types of real estate

While a residual interest in a personal residence can be an appropriate gift, other property you own and use may also be a likely candidate. In this case, you will be taxed on 50 percent of the capital gain attributable to the residual interest, but the tax savings from the donation receipt will always more than offset the tax on the gain.

Harvey M., age 73, has a cottage on a lake a few hours from his home in Ottawa. He bought the cottage many years ago for $40,000, and it is now worth $100,000. He's reluctant to sell it, both because he still uses it frequently and because the sale would result in a taxable gain of $30,000 (50 percent of $60,000). By transferring it to the Diocese of Ottawa with a retained life interest, only 50 percent of the gain attributable to the residual interest will be taxed. In Mr. M's case, the $53,608 donation receipt he receives for the overall value of the residual interest will more than offset the taxable gain of $16,082.

When you give property that has appreciated in value, the amount of the donation receipt creditable in any one year is 100 percent of the taxable gain in the gift, plus 75 percent of your other income. This assures that you will always realize net tax savings, no matter how much the property has appreciated.

Note: With real estate held solely for investment purposes, it generally makes more sense to contribute the residual interest by means of a charitable remainder trust.

To make your planned gift, please contact the Diocesan Gift Planning Consultant.

The Charitable Remainder Trust

Tax Advantaged Gift Planning Strategies
Anglican Diocese of Ottawa

You may have an asset - a sum of cash, appreciated securities or real estate - that you'd like to become your gift to your Parish church or the Diocese, but for now you need the income it provides. One possibility, of course, is to leave it as a bequest after your death. But there is another option: with a charitable remainder trust, you can make your gift now - and continue to receive the income for your lifetime, the joint lives of yourself and your spouse, or a specified term of years.

Unlike a future bequest, which yields no immediate tax benefit, the charitable remainder trust provides you with a donation receipt in the year of your gift. Also, placing the property in trust frees you from management responsibility and removes the property from your estate, guaranteeing your privacy. Consider an example:
Sheldon M., age 70, wants to establish an endowed fund with the Diocese of Ottawa in memory of his deceased wife, but he is reluctant to give up any of his investment income. He transfers property worth $250,000 to a charitable remainder trust from which his net income will be approximately $15,000 a year for life. When he funds the trust, he receives a donation receipt for $120,675, which, assuming a 45-percent combined tax credit, will translate into tax savings of $54,304. After his death, the trust principal will be used to create the endowment.

The tax benefits

The donation receipt Mr. M. receives represents the present value of the future gift (the "charitable remainder") which Diocese of Ottawa will receive at his death. It is an actuarially computed figure based on the amount contributed, the age of the donor, and an appropriate discount rate (the lower the rate, the larger the donation receipt). The amount of the donation, which may be claimed in any given year, is limited to 75 percent of the donor's net income for that year, but the excess may be carried forward up to five years beyond the year of the gift. If Mr. M's income were $100,000, he would need one additional year to achieve maximum tax savings.

Funding your trust with appreciated property

The assets you use to fund your charitable remainder trust may include securities and real estate, and often these will have increased in value during your ownership. When you transfer property that has appreciated in value and you are the income beneficiary, you will be taxed on 50 percent of the gain attributable to the charitable remainder.

Suppose that Sheldon M. funds his trust with $250,000 worth of listed stock for which he paid $100,000 some years ago. The total gain on the stock is $150,000. The computed present value of the charitable remainder is $120,675, or 48.27% of the entire $250,000 trust. Therefore, he recognizes $72,405 of gain (48.27% of $150,000), and $36,202 (50% of $72,405) is taxable. Although the tax on this would be $18,101, he has a tax credit of $54,304 from the donation receipt. Thus, he offsets the tax on the gain and realizes net tax savings of $36,203.

No matter how much taxable gain is attributable to the charitable remainder of your trust, the tax credit resulting from your donation receipt will always exceed the tax on the gain, unless you have named someone other than yourself as income beneficiary. This is true even though the capital gain is taxable, because the amount of the donation receipt you can claim for credit is now 100 percent of the taxable gain arising from the gift plus 75 percent of your other income.

To make your planned gift, please contact the Diocesan Gift Planning Consultant.

Legacy Giving: Will Power