I’d like to start by welcoming everyone today. I’m very excited that you all could make it, as we’re going to discuss an important topic that sometimes gets overlooked when it comes to developing a sound financial plan. Today’s presentation will be about how to integrate charitable gift planning into your overall financial strategy in a way that will allow you to give to your favourite charities and reduce your overall taxes. (Note to consultant) Please insert your name, title from your business card and the name of your dealer on this slide. The dealer name under which you present yourself will differ, dependent upon whether you are licensed with Investors Group Financial Services Inc. (Mutual Fund Dealers Association - MFDA) or Investors Group Securities Inc. (Investment Dealers Association - IDA). If you are licensed through the MFDA, you must use this dealer name on the slide: Investors Group Financial Services Inc. (use in Canada outside Québec) Investors Group Financial Services Inc., Financial Services Firm (use inside Québec) If you are licensed through the IIROC, you must use this dealer name on the slide: Investors Group Securities Inc. (use in Canada outside Québec) Investors Group Securities Inc., Firm in Financial Planning (use inside Québec)
Before we jump right into this presentation and begin discussing charitable gift planning, I want to take a minute to go over some of these key points. It is important to me that you are aware of these details before we start – details that I hope all financial advisors are talking to you about. First, we are going to be talking about many ideas today but, before you decide to act, it is critical that we review your specific situation. Everyone is different so what works for some may not be as applicable to others. Second, this is what I do for a living. If we decide in the future to work together it is important to me that you are aware of how investments and plans work, any fees that might be associated with them, and how I get paid. We have plenty of material that I can share with you that spells it all out very clearly. (Go over disclaimers) Now that we’ve gone over that, let me begin by tell you why I am proud to be an Investors Group Consultant… (Note to Consultant) If you are licensed with Investors Group Financial Services Inc. (Mutual Fund Dealers Association – MFDA) use line one of the disclaimers listed above. If you are licensed with Investors Group Securities Inc. (Investment Dealers Association – IDA) use line two of the disclaimers. Delete the dealer line that is not applicable. If there is a guest speaker insert the following disclaimer on this page: Views expressed by guest speakers may not be shared by Investors Group.
One of the things that makes me proud of being a part of Investors Group is our long heritage of grassroots involvement and strong culture of giving back to the community. When I started with Investors Group, I was overwhelmed by the many ways the company and those representing Investors Group support communities and how they work in partnership with charitable organizations to make our communities healthier and more vibrant places to live and work. You are likely not aware of this but Investors Group is a founding member of Imagine Canada’s Caring Company Program, a national awareness initiative designed to stimulate corporate giving to charitable and not-for-profit organizations. As an Imagine Caring Company, Investors Group has committed to annually donate at least one per cent of our average annual pre-tax income to charitable organizations in communities all across Canada. To put things in perspective, in 2007 we donated almost $6 million to over 1,300 organizations across the country. At Investors Group there is a strong culture of giving and we feel that any well-rounded financial plan should also include a charitable gift planning strategy that will have a positive and lasting impact on your community.
Before we get into the specific methods of planned giving, lets take a quick look, a snapshot if you will, of how truly generous we Canadians really are. According to Statistics Canada’s last census: Over 80% of Canadians made a charitable donation in the last five years, And in 2006, over $8.5-billion were donated by Canadians Although the number of donors has remained relatively unchanged over the past few years, the donation amount has continued to grow substantially. Approximately 80% of Canadians have made donations in some form or another in the past 5 years. But what is truly remarkable is that these contributions have grown substantially with a median donation of $250 in 2006. As you can see, Canadians are extremely generous in their charitable donations. In fact the numbers show that Canadians are currently giving more than ever before. Now lets take a look at how individuals such as yourselves can get involved and give back both now and in the future...
There are eight major strategies that individuals can use to make charitable gift planning a part of their overall financial plan. (Go through the list) At first glance, this appears to be somewhat confusing, as there are so many options available. Which of these options are right for you? Note that every single one of these strategies comes with its own individual set of advantages and benefits. But there is one approach in particular that has been growing in popularity over the past few years for several reasons that we will touch on throughout this presentation. That strategy is the establishment of your own personal donor advised fund under a program called : The Investors Group Charitable Giving Program.
Your own personal account within the Investors Group Charitable Giving Program and similar types of charitable gift planning strategies offer more control and flexibility than conventional methods of giving and it can be by far one of the most rewarding. So why is this a smarter way to give? The Investors Group Charitable Giving Program is designed to help individuals effectively reach their immediate and long-term charitable giving goals, by integrating strategies directly into an existing financial plan. Think of it as creating your own private foundation, but without the tedious administrative responsibilities or the high upfront costs. As mentioned, the program has many similarities to a private foundation, in that you can name your account and personally recommend grants to desired charitable organizations on an annual basis. The Investors Group Charitable Giving Program allows you to give now and in the future, therefore ensuring that you can extend your support for organizations well beyond your years. It is a simple, tax-favoured investment vehicle that facilitates giving and establishes a framework for your philanthropic goals. The program is an account established within a Canadian registered charity – usually a public foundation. As a donor, you will receive an immediate tax receipt for all contributions made to the foundation and you also retain the right to advise the charity on how the account’s income (usually called grants) is to be allocated each year. Now that I’ve painted a picture for you illustrating what the Investors Group Charitable Giving Program is, lets take a look at the five easy steps involved in setting up your account…
Setting up an Investors Group Charitable Giving Program account is very straightforward. (Go over the five steps) Over the next few slides, we’ll go over these five simple steps and the many advantages of the program. To help visualize the process, Lets take a look at a case-study and see how easy it was for Alex Jones to setup her own charitable giving fund…
The first step is to name the account. Alex is free to name her account however she wants. For example, she could name it the “Alex Jones Fund”, “The Jones Family Fund”, or the “Alex Jones Foundation”. Every time a grant is sent to a charity, her account’s name - in this case, she has selected to go with the “Jones Family Fund” - will be cited as the source of the gift, unless of course she would prefer the grant to be sent anonymously.
As part of the initial account set-up, Alex must also name a successor which can be done simply submitting a form provided by her Consultant – there is no need to include a provision in her Will thereby incurring expensive legal costs. Alternatively, she can complete a standing grant recommendation form which ensures that the grants will automatically continue to benefit the charities she has selected well beyond her years. Deciding on a successor is a very important step and requires some thought, so if you need any help I can certainly provide you with some guidance. Lets move on to the next step…
Once the account has been named and a succession plan has been established, the next step is to make the initial contribution. In order to setup an account your initial donation must be at minimum $25,000. This amount can be attained by combining contributions from various individuals – could be friends, family - anyone. Remember, any donations made to your account are irrevocable, which makes it even more important to discuss this with a financial Consultant prior to committing to this strategy – I can help you with this. The most basic type of donation is simply a cash donation. Once the initial donation is made, Alex receives an immediate tax receipt for $50,000. This tax receipt, which can be carried forward for up to five years, can be used to reduce her overall taxable income. (Note to consultant) 95% of the donated amount must be held by the Foundation for a minimum of 10 years due to the “disbursement quota” provisions in the Income Tax Act which apply to charities. One of the “disbursement quota” rules is that the charity must spend at least 80% of the amounts that were donated in the preceding year on charitable activities. However, donations that are deemed to be “enduring property” are exempted from this provision. A donation made with a directive that it be retained by the charity for at least 10 years is considered to be “enduring property”, and thus can remain invested by the charity such that the investment income can be used to make ongoing grants. If you are unsure of this detail, please call the Advanced Financial Planning team for a further explanation prior to delivering this seminar.)
Before moving forward, there is something I want to make clear. You do not need $25,000 in cash in order to set up your own personal account. There are several ways you can donate. One of these ways is to make an “in-kind” gift of publicly traded securities – this can be publicly listed stocks, bonds and mutual funds. Once the initial donation is made, Alex receives an immediate tax receipt for $50,000. This tax receipt, which can be carried forward for up to five years, can be used to reduce her overall taxable income and even offset capital gains if shares or other appreciated property is sold. The added benefit of donating securities is she can avoid paying capital gains on the appreciation of the assets and therefore reduce her taxes. Remaining on the topic of making an “in-kind” donation, lets take a look at what happens if Alex would have instead cash-in her investments and then donated the proceeds to her account rather than simply transferring the ownership of the investments directly…
Lets say the original cost of the mutual funds Alex donated to the “Jones Family Fund” was $20,000. Then, at the time she sold her investment, the adjusted cost base would be $20,000. If the current market value of her mutual funds is $50,000 (meaning the value has increased by $30,000), she would have to pay tax on half the amount of the increase. So $15,000 of the $30,000 increase in value is considered taxable income at her current marginal tax rate of 45%. That means at the time of donation she would pay $6,750 in taxes, lowering her net contribution. This may not be relevant to everyone here today, but if you have investments that you do not feel you will require for income later in life, making an “in-kind” donation could a great way to reduce your future tax burden. Lets take a look at one more method Alex can make a contribution…
Alex decides that rather than donate cash or make an “in-kind” donation, she would like to transfer the ownership of a life insurance policy with a cash surrender value of $50,000. She will then receive a $50,000 tax receipt which can be used to reduce her taxes payable. If Alex continues to pay the insurance premiums on the policy, a donation receipt will also be issued to her in respect to these payments, again, reducing her tax liability. By now you’ve heard me reference these “tax savings” quite a few times and you may be wondering just how much tax could I save by donating $50,000 to my account? Let take a look and see how much Alex saved and determine what her true cost of donating looks like… (Note to Consultant) At the death of the donor, no donation receipt is issued, as the death benefit is not considered to be a gift if the policy is owned by the charity.
In all three examples, Alex has made a donation worth $50,000 and therefore receives a tax credit for the same amount. Alex has an annual income of $95,000 and has a combined tax rate of 45%. With the $50,000 she donated to her account, she has collected $22,500 in tax credits that she can use against her income (up to 75% of annual income, or up to 100% of net income the year she passes away). Remember, even if you don’t use up the entire tax credit the same year, it can be carried forward for up to five years. When you take these savings into account, the net cost of her donation ends up being only $27,500. That’s significantly less than the original $50,000. Now lets move on and see what the next steps are…
Alex will be asked to select which eligible Investors Group fund(s) she would like to invest her initial amount and contributions in. We will work with Alex to help her select the most appropriate fund as part of a properly constructed investment plan. Each year, Alex and her Consultant will be notified of the amount that the Jones Family Fund has available to grant to charities. Generally, a fund will grant approximately 3 to 5 percent of the total contribution amount each year. This year, the total granting amount is equal to 4% of her total contribution of $50,000. This means that she will have $2000 available to distribute to various charitable and not-for-profit organizations. (Note to Consultant) Granting history : 2007 = 4.09% 2008 = $.07%
As we mentioned in the previous slide, Alex is required to distribute the full $2,000 to various qualifying organizations. The grants must be a minimum amount of $500. For this year, she decides to allocate her grants as follows: $500 to the Royal Conservatory of Music, as she has always enjoyed classical music. $1,000 to the Canadian Red Cross since she believe strongly in their aid objectives overseas And finally $500 to the Canadian Olympic Association. This is the latest addition to her list of organizations she supports, since one of her grandchildren recently began training as a rower with the national team. When the organization receives the grants, it will be cited and recognized as coming from “The Jones Family Fund” or if she wishes, the grant can be made anonymously. Or if she prefers, Alex can provide a standing grant recommendation that will remain in effect after her death – of course she can change the recommendation at anytime during her life.
Going forward, Alex, with the help of her Consultant, can decide how much she can afford to contribute annually. Contributions can be as large and as frequently as she likes, as long as the amount is a minimum of $5,000. The key here is that she contributes within her means. To illustrate just how flexible this strategy is, Alex can even name the Jones Family Fund account as the beneficiary to a life insurance policy or as the beneficiary of her leftover RRIF as her final contribution when she passes away. Both strategies result in a tax credits that can be applied against Alex’s estate’s tax liability. Alternatively, Alex could also make contribution in the form of a charitable gift to her account through a bequest in her Will. Another interesting feature about the Investors Group Charitable Giving Program is that her family and friends can also contribute to Alex’s account and help further her philanthropic objectives while also benefiting from a tax receipt. (Note to Consultant) Bequest of a life Insurance: Upon receipt of the death benefit, the Foundation will issue a donation receipt for $50,000 in Alex’s name. The donation tax credits are applied against the tax liability of the deceased. As Alex continues to own the policy, the premium payments are not deemed to be a charitable donation. RRIF Beneficiary Designation: At death, a donation receipt for an amount equal to the death benefit is issued in Alex’s name. The donation tax credits will offset the income inclusion for the RRIF. The RRIF assets are added to Alex’s income for the year of death. The benefit paid to the charity is deemed to be a charitable gift, so a donation receipt is issued in the name of the deceased.
Once the account has been established and is well on its way, she can choose to contribute each year to add to her account, therefore increasing the size and number of available grants to allocate. Again each additional contributions must be a minimum of $5,000 dollars. She as well as her Consultant will receive ongoing reporting statements and updates to keep track of her giving. Or if she wishes, Alex can change her grant recipient recommendations. (Note to Consultant) IGFS clients receive statements semi-annually. IGSI clients receive statements quarterly.
The reason we are so enthusiastic about the Investors Group Charitable Giving Program is because it encompasses so many advantages where other methods of charitable gift planning seem to come up short. Some of the main benefits are: An immediate or deferred tax savings. Simplicity - You can consolidate all your charitable giving in one account and make sense of all the options available to you. Cost effective – The strategy includes many of the benefits of a private Foundation without the administrative responsibilities and upfront costs. Flexibility – You can support the charities you want when you want while remaining in control. You can chose to remain anonymous or be recognized for your generosity. You can support your favourite charities now and well beyond your years and create a charitable legacy that you will be remembered by.
Despite all the benefits of this strategy, this is the final question: Is this approach to giving back to your community right for you? (read through the bullets) Do any of these bullets points sound like your personal situation? If so, this may be something to seriously consider.
Remember: You are unique. Your outlook on life and the sum of your life experiences are unlike anyone else’s. That’s why your approach to giving back is unique as well. Investors Group has a long heritage of grassroots involvement and a strong corporate culture of caring for our communities. As an Investors Group Consultant, I am there to help individuals reach their goals and objectives, including charitable gift planning.
Are there any questions? (Note to Consultant) Ensure you have everyone fill out the Questionnaire and let them know that you will be contacting them later in the week to set a time to meet in person and discuss their personal charitable goals.
A smarter way to give. <ul><li>Today and for the future </li></ul>Melissa Dailey Consultant Investors Group Financial Services Inc.
This presentation… <ul><li>Is provided by Investors Group Financial Services Inc. (In Quebec, a financial services firm). </li></ul><ul><li>Is provided by Investors Group Securities Inc. (In Quebec, a firm in financial planning). </li></ul><ul><li>Is presented as a general source of information only, and is not intended as a solicitation to buy or sell investments, nor is it intended to provide professional advice including, without limitation, investment, financial, legal, accounting or tax advice. For more information on this topic or on any other investment or financial matters, please contact an Investors Group Consultant </li></ul><ul><li>Although we have tried to ensure the accuracy of this information, tax laws change frequently so the provisions and exemptions mentioned in this presentation may change. </li></ul><ul><li>Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual Funds are not guaranteed, their values change frequently and past performance may not be repeated. </li></ul><ul><li>™ Trademark owned by IGM Financial Inc. and licensed to its subsidiary corporations. </li></ul><ul><li>®Imagine Canada’s logo, “Imagine Canada”, Imagine’s logo and “Imagine” are all trademarks used by Imagine Canada, and are used with permission. </li></ul>
The Investors Group culture of giving <ul><li>Longstanding heritage of: </li></ul><ul><ul><li>Grassroots involvement </li></ul></ul><ul><ul><li>Corporate Funding </li></ul></ul><ul><ul><li>Seed Funding for new initiatives </li></ul></ul><ul><ul><li>Strong employee involvement in the community </li></ul></ul><ul><li>A Founding member of Imagine Canada’s Caring Company Program. </li></ul><ul><li>Belief that a well-rounded financial plan should not be without a charitable gift planning strategy. </li></ul>
The growing generosity of Canadians 1998 1999 2000 2001 2002 2003 2004 2005 2006 0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00 Source: Statistics Canada Donations ($-billions) Total annual Canadian donations
Charitable gift planning <ul><li>Charitable bequest </li></ul><ul><li>Donate publicly traded stocks or securities </li></ul><ul><li>Establish a charitable remainder trust </li></ul><ul><li>Donate a life insurance policy </li></ul><ul><li>Establish a charitable life annuity </li></ul><ul><li>Gifts of Registered Plans or Life Insurance </li></ul><ul><li>Establish a private foundation </li></ul><ul><li>Establish a donor advised fund </li></ul>
<ul><li>Why is establishing your own personal account within the Investors Group Charitable Giving Program a smarter way to give? </li></ul><ul><ul><li>Similar to having your own private foundation. </li></ul></ul><ul><ul><li>No administrative responsibilities. </li></ul></ul><ul><ul><li>No upfront costs. </li></ul></ul><ul><ul><li>Immediate tax benefits. </li></ul></ul><ul><ul><li>Ability to support your favourite charities now and in the future. </li></ul></ul><ul><ul><li>Builds a long-term charitable gift planning strategy. </li></ul></ul>
The Investors Group Charitable Giving Program <ul><li>Five easy steps: </li></ul><ul><li>Name your account </li></ul><ul><li>Name your successors </li></ul><ul><li>Make your initial gift </li></ul><ul><li>Make your recommendations </li></ul><ul><li>Further gifts </li></ul>Let’s take a look at how easy it was for Alex Jones to set up her own Investors Group Charitable Giving Program account…
Step 1: Naming the account <ul><li>The Investors Group Charitable Giving Program will establish an account. </li></ul><ul><li>Alex can name the account however she chooses. </li></ul><ul><li>For example: </li></ul>“ Jones Family Fund” “ Alex Jones Fund” “ Alex Jones Foundation”
Step 2: Alex names her successor <ul><li>As part of the initial account set-up Alex must: </li></ul><ul><ul><li>Name a successor to take-over and/or </li></ul></ul><ul><ul><li>Name charities to automatically receive grants </li></ul></ul>
Step 3a: The initial gift – Cash donation <ul><li>Alex Jones makes a cash donation of $50,000 to start the “Jones Family Fund” </li></ul><ul><ul><li>Remember: the donation is irrevocable. </li></ul></ul><ul><li>Receives a tax receipt for $50,000 – reducing her overall tax bill. </li></ul>
Step 3b: The initial gift – “In kind” donation <ul><li>Alex Jones makes an in-kind donation of $50,000 worth of mutual funds to start the “Jones Family Fund”. </li></ul><ul><li>Receives a tax receipt for $50,000 – reducing her overall tax bill. </li></ul><ul><li>She is not required to pay capital gains tax on the appreciated value of the in-kind donation. </li></ul>*Assumes the value of the mutual fund when received by foundation is $50,000.
Step 3b: The initial gift – “In kind” donation <ul><li>The adjusted cost base of the mutual fund is $20,000. </li></ul><ul><li>If Alex had instead redeemed the mutual funds and then donated the net value to the “Jones Family Fund”: </li></ul><ul><ul><li>She would have had to pay $6,750 in tax on the capital gains.* </li></ul></ul><ul><ul><li>Her net contribution to charity would be lower. </li></ul></ul>*Assuming a 45% tax rate on the capital gains would be 45% x 50% x ($50,000 - $20,000) or $6,750.
Step 3c: The initial gift – Donation of life insurance <ul><li>Alex Jones makes a donation of a life insurance policy worth $50,000 to start the “Jones Family Fund”. </li></ul><ul><li>Receives a tax receipt for $50,000 – reducing her overall tax bill. </li></ul><ul><li>Alex also receives a tax receipt for every additional insurance premium payment. </li></ul>
Example: Tax reduction benefits <ul><li>Receives a tax receipt for $50,000. </li></ul><ul><li>Example: </li></ul><ul><ul><li>Alex Jones has annual income of $95,000, taxed at a combine rate of $95,000. </li></ul></ul><ul><ul><li>She donates $50,000 to the Jones Family Fund. </li></ul></ul><ul><ul><li>Alex can use her tax credit to reduce her taxes by $22,500. </li></ul></ul>Donation $50,000 Tax credits (federal and provincial) $22,500 ($50,000 x 45%)* Net cost of gift $27,500 ($50,000 - $22,500) *Assumes a combined Federal and Provincial tax credit rate of 45%
Step 4: Making your recommendations <ul><li>Alex selects which eligible funds in which she would like to invest her initial amount and contributions. </li></ul><ul><li>Annual notification of funds available for grants. </li></ul><ul><ul><li>Typically grant approximately 3% to 5% of the account. </li></ul></ul><ul><li>This year, the Jones Family Fund has $2,000 available. </li></ul><ul><li>She can recommend which charitable organizations will receive support. </li></ul>
Step 4: Making your recommendations <ul><li>Alex is required to distribute the full $2,000 to various qualifying organizations </li></ul><ul><ul><li>Note: The minimum grant per charity is $500 </li></ul></ul><ul><li>This year, she chooses the following grants: </li></ul><ul><ul><li>Royal Conservatory of Music: $500 </li></ul></ul><ul><ul><li>Canadian Red Cross: $1,000 </li></ul></ul><ul><ul><li>Canadian Olympic Association: $500 </li></ul></ul><ul><li>Grants are recognized as from the “Jones Family Fund”. </li></ul>
Step 5: Further gifts <ul><li>Alex contributes to the Jones Family Fund as much or as frequently as she chooses. </li></ul><ul><ul><li>Note: Contributions must be a minimum of $5,000. </li></ul></ul><ul><li>She can also: </li></ul><ul><ul><li>Name the Jones Family Fund account as the beneficiary of a life insurance policy . </li></ul></ul><ul><ul><li>Name the Jones Family Fund account as the beneficiary of her RRIF . </li></ul></ul><ul><li>Her family and friends can contribute to her account. </li></ul><ul><li>Tax receipts are provided to all who contribute. </li></ul>
Keeping you informed <ul><li>Additional contributions to the Jones Family Fund each year. </li></ul><ul><li>Ongoing reporting statements. </li></ul><ul><li>Can change her grant recommendation from year to year. </li></ul>
Why the Investors Group Charitable Giving Program? <ul><li>Simple, cost effective and flexible. </li></ul><ul><li>Donor recognition or anonymity. </li></ul><ul><li>Support your favourite charities now and in the future. </li></ul><ul><li>Immediate or deferred tax savings. </li></ul>
Is the Investors Group Charitable Giving Program right for you? <ul><li>Do you have assets you have already earmarked for charity as part of your estate? </li></ul><ul><li>Would you like to support your favourite charity now and over the long term? </li></ul><ul><li>Do you want a simple, cost effective way of giving back? </li></ul><ul><li>Have you considered establishing a private Foundation but feel you cannot afford the time or money? </li></ul>
A smarter way to give <ul><li>Your own unique circumstances and preferences will determine the best way for you </li></ul><ul><li>We understand – because we care too </li></ul>I can help: See me about setting up an appointment to discuss the most appropriate charitable gift planning approach.
Questions? “ We make a living by what we get; We make a life by what we give” Winston Churchill “ A smarter way to give” – C3527 – 07/2008