Gifting Securities: A Beginner’s Guide
By Tyler MacLean, Financial Planner at Aviso Wealth | Beem Credit Union, and Vice Chair of Langley Community Health & Hospital Foundation Board of Directors
A gift of securities is one of the most tax-effective ways to support a charity in Canada. Instead of donating cash, you have the option to transfer publicly traded stocks, bonds, mutual funds or other marketable securities and investments you may already own in your portfolio or RRSP, directly to a registered charity that you care about. Many people assume it’s complicated, but in reality, it’s a simple process that can have major benefits for both the donor and the charity.
Here’s how it works: When you donate securities directly to a charity, you receive a charitable tax receipt for the full fair market value of the security at the time of the donation. Even better? You pay no capital gains tax on any appreciation in the value of those securities.
For example, say you were looking to make a meaningful impact to health care in Langley by making a $5,000 donation to Langley Community Health & Hospital Foundation. One option is to give directly through your bank account, but let’s say that you had shares of an investment that you bought for $1,000 several years ago, and today they’re worth $5,000. If you sell them and donate the cash, you’ll owe capital gains tax on the $4,000 profit. But if you gift the shares directly to a charity, you get the $5,000 tax receipt - and avoid capital gains tax altogether.
This tax treatment makes gifting securities more efficient than donating cash. You could end up giving more to the charity while reducing your own tax bill. Win-win.
The actual process is straightforward: Most charities, like Langley Community Health & Hospital Foundation, will have a transfer form available on their site that you can fill out with your broker or financial advisor, the shares are transferred directly and the charity then sells the securities and uses the proceeds for its meaningful work.
We give to charities because we believe in the work that they do - if we can make a personal impact as well - bonus! With year-end tax planning always around the corner, now is a great time to consider it.
This information provided is for informational purposes only, may not be suitable for all investors and does not constitute financial or tax investment advice.
Mutual funds and other securities are offered through Aviso Wealth, a division of Aviso Financial Inc.