Securities as a gift offers tax savings

If you are thinking of a charitable gift or bequest to a charity, it is prudent to consider the assets that appreciate in value and are subject to a capital gains tax.

Securities is one good example.

Securities are financial instruments that have monetary value and include stocks, bonds and mutual funds. When a donor or donor’s estate sells securities and donates proceeds from the sale, 50 per cent of the difference between the purchase price and the current value will be taxed.

On the other hand, if the securities are donated in kind, the capital gains tax is eliminated and as a result, the donation and the tax receipt are greater. (See chart.)

The donor, or donor’s estate, receives a tax receipt for the fair market value on the date of the transfer of the securities into the charity’s account and the sale amount supports the charitable cause chosen by the donor. 

By donating securities, the capital gain accrued won’t be taxed, leaving more for other beneficiaries when the donation comes through a bequest, or provides a larger amount for a charity.

It is preferable from the smart-giving perspective to empower the estate trustee to identify and donate securities with the most capital gain, thus maximizing the tax savings while fulfilling the bequest.

(Okonski is the Manager, Planned Giving & Personal Gifts, at the Archdiocese of Toronto.)