Wealth with Purpose: How Philanthropy Strengthens Your Financial Plan
While financial planning is essential for building and preserving wealth, many individuals overlook the role philanthropy can play in their overall strategy. Even those with a strong desire to give back often don’t include charitable giving in their formal financial plan —not because of a lack of intent, but because they’re unsure how todo so effectively or don't realize the significant financial benefits it can provide.
For high-net-worth individuals (HNWIs), especially, philanthropy can serve a dual purpose: creating meaningful impact and acting as a powerful financial planning tool. By incorporating charitable giving into your financial and estate strategy, you can reduce your tax burden, minimize probate costs, and pass on more wealth to the next generation — all while supporting causes that matter to you.
Here’s how strategic giving can benefit you from both a tax and estate planning perspective:
🔹 1. Charitable Donations for Immediate Tax Credits
How it works: Donations to registered Canadian charities qualify for non-refundable federal and provincial tax credits, which can offset up to 75% of your net income (or 100% in the year of death or the preceding year).
Example: You donate $250,000 to a registered charity.
Federal tax credit: 29% on the first ~$200,000, 33% on the balance (for high-income earners).
Provincial tax credit varies (e.g., ~11.16% in Ontario).
Potential total tax savings: $100,000+ depending on province and income level.
🔹 2. Donating Appreciated Securities
How it works: When you donate publicly traded securities (stocks, mutual funds, ETFs) in-kind to a registered charity, you pay no capital gains tax on the appreciated value — and you still receive a donation tax receipt for the full fair market value.
Example: You donate shares worth $500,000,originally purchased for $200,000.
Capital gain: $300,000 — no tax owed.
Donation receipt: $500,000.
Tax credits can reduce your taxes by over $230,000, depending on your province.
This strategy is especially powerful for individuals with large capital gains in their portfolios.
🔹 3. Donor-Advised Funds (DAFs):Flexible Giving with Immediate Tax Benefits
How it works: A DAF allows you to donate cash or securities now (and receive an immediate tax receipt), while distributing the funds to charities over time.
Benefits:
Immediate tax credit on contribution.
No capital gains tax on donated securities.
Professional investment management and legacy planning.
Example: You donate $1 million in securities to a DAF.
Receive full tax credit for the $1 million donation.
Avoid ~$120,000 in capital gains tax.
Continue to advise on grants in future years.
🔹 4. Charitable Gifts in Your Will: A Tax-Efficient Estate Strategy
How it works: Leaving a gift to charity in your will can generate a donation tax credit on your final return (or on the return for the year before death), significantly reducing taxes on your estate.
Example: You leave $2 million to a hospital foundation in your will.
Your estate receives a tax credit for the full donation amount.
This could offset up to 100% of your net income in the year of death and prior year.
Reduces probate fees and leaves more to your heirs.
🔹 5. Gifting through Life Insurance
How it works: You can name a charity as the beneficiary (or owner) of a life insurance policy. Premiums may be eligible for donation tax credits depending on the structure.
Benefits:
Make a large future gift with relatively small premiums.
Receive annual donation receipts if the charity owns the policy.
Keep the gift outside your estate (no probate).
Example: You purchase a $1 million policy, naming a charity as owner and beneficiary.
Annual premiums are treated as charitable donations.
Tax credits reduce your annual tax bill during your lifetime.
The charity receives $1 million+ tax-free at your death.
Why It Matters
Smart philanthropy doesn’t just benefit others — it helps you:
✅ Maximize tax savings today and at death
✅ Minimize capital gains and estate taxes
✅ Leave a legacy aligned with your values
✅ Pass on more wealth to your family
Let’s Talk
Whether you’re considering a substantial one-time donation, using a donor-advised fund, or integrating charitable giving into your estate plan, we’re here to guide you.
Let’s build a strategy that reflects your values while maximizing the financial advantages of giving.