Tax, Estate & Financial Planning Advocate
This document outlines the key features and figures of common account types where marketable securities may be invested, designed to serve as a visual aid for conversations between individual investors and their advisors. This is presented using summary phrasing, allowing an advisor to expand and explain as needed to cater to an individual’s current circumstances.
The charitable sector fills the gap between what is affordable and available through public channels, and what a caring society would like to provide – but it doesn’t happen automatically.
In reality , most charities depend on consistent financial contributions from loyal backers to help them deliver on that promise. Unfortunately, day-to-day operations often consume much of that committed support, leaving precious little left to grow the organization, fund capital projects or pursue longer-term strategic initiatives.
That’s where planned giving comes in.
Charitable giving is a donor’s expression of support for a worthy cause or organization. It shows the person’s selflessness, or what we sometimes call ‘giving from the heart’. Planned giving marries the heart to the head.
For a charity, there is a delicate balancing act between keeping the lights on, and eventually having to replace infrastructure. While businesses also grapple with trade-offs between present and future needs, those commercial enterprises have the advantage of being able to produce and retain profit for reinvestment.
Not so for charities where the output is the good deeds delivered to their communities, with no monetary return for the charity to re-deploy.
In response, a charity pursuing a traditional fundraising-focused approach might try to find more donors, or more donations from existing donors.
By contrast, a planned giving model seeks to align interests so that the charity has the stability to achieve its objects, and donors are contributing in a way that is more fulfilling – both as a reflection of moral value, and in driving financial value – where and when its needed most.
To be clear, planned giving is just as concerned with the fundraising imperative as in a traditional approach, but goes past the donation as a transaction, framing it as part of a strategic plan. By identifying donors who have both fierce commitment and financial capacity, a charity can better focus its sustainability efforts. And for those identified donors (often self-identified), it’s encouraging and comforting when a charity shows its readiness and willingness to partner with them in a mutually beneficial manner.
Still, to take this feel-good philanthropy to the next level, there needs to be a financial incentive and payoff.
To the point, how can you squeeze more financial currency out of a donor’s engagement, or reduce a donor’s cost of giving … or both? That’s where tax comes in.
Our tax system provides generous relief when someone makes a charitable donation. This is an acknowledgement, motivator and reward for donors at all income and asset levels. And for those who have the personal inclination and financial resources to do more, planned giving allows them to take advantage (in the most positive sense) of those rules, especially when coordinated with tax beneficial features of a range of financial products and estate planning strategies.
What follows is a brief outline of the common forms that planned giving may take, each presented here distinctly, but with most able to be combined within a comprehensive wealth and estate plan. These draw in varying ways from the fields of investment, insurance, tax and law – with overlapping expertise invariably involved – so readers are encouraged to retain qualified professional advice before initiating any action.
To begin, be clear on who is making the donation, as that determines how the tax system treats that donation.
An owner/shareholder could cause a corporation to pay a dividend that the shareholder can use (net-of-tax) to make a personal donation, or have the corporation make the donation itself. If the corporation makes the donation, it is treated as a deduction when calculating the corporation’s net income. Legal and tax advice is recommended to determine which of these two routes would be most suitable in a given situation.
A charity may be named as a beneficiary under a person’s Will. The gift may be a legacy of a specific figure or calculated amount, or be a participation in the estate residue.
The charity will issue a receipt for the value of the gift/donation in the year it is received from the estate. The corresponding credit may then be claimed that year, in any preceding estate year, in the year of death, or in the year preceding death. It is generally most valuable in the year of death (when income includes deemed capital dispositions and retirement accounts) and the preceding year, when it can offset up to 100% of net income.
Verify with a tax advisor based on the facts of the situation whether it may be more tax-efficient for the charity (which is a non-taxable entity) to receive a legacy rather than residue, as the latter route may not allow for optimal use of the donation tax credit.
If a donation is made by Will as above, its tax benefits accrue to the estate beneficiaries, noting again that if a charity is the main or only estate beneficiary, the tax credit from the donation may go partially or fully unused. Instead, a donor could establish a charitable remainder trust that commits to a donation at death, but keeps the property for the donor’s use for life.
For example, a retired professor living on the edge of the old campus could transfer her home into such a trust with the university as ultimate capital beneficiary. A receipt can be issued for the net present value of the eventual donation, as determined by an actuary. The professor can use the associated tax credit in the year of donation, with carryforward of excess unused credit value for up to five years.
RRSPs and RRIFs are brought into taxable income in the year of death, with potential for a rollover (with continuing tax-sheltering) to a spouse or financially dependent child. Where there is no such surviving person or those needs have been addressed elsewhere, a charity could be named as beneficiary, whether on the plan or by direction of the person’s Will. This will cause the gross plan value to be paid directly to the charity, bypassing probate tax in those provinces where applicable.
The charity will issue a receipt for the amount it receives, with the related credit negating the tax on the deemed income inclusion, and any excess credit value being available to reduce tax on other income in the final year or preceding year.
Like RRSPs and RRIFs, TFSAs are paid out on a person’s death, but there is no income inclusion. It is generally desirable to direct a TFSA to a spouse to allow for continuing tax sheltering. If there is no spouse, a charity could be named as beneficiary, again whether on the plan or by direction of the person’s Will. As in the case of RRSPs and RRIFs, the designation causes the gross plan value to be paid directly to the charity, bypassing any probate tax.
The charity will issue a receipt for the amount it receives, which can reduce tax in the final year or preceding year.
A policyholder may name a charity as beneficiary of a life insurance policy, either for the full amount or some percentage/portion of it. An alternative way to allocate a portion is to designate the tax-sheltered accumulating account of a permanent policy to go to a charity, while preserving the face value for its original intended purpose.
The charity will issue a receipt for the amount it receives, which can reduce tax in the final year or preceding year.
If a donor has a life insurance policy that is no longer needed for its original purpose, the donor could transfer/assign it to a charity. While tax will apply on the disposition of the policy in this way, the charity will issue a receipt for the policy’s cash value, which can be used to reduce or eliminate such tax arising in the year of donation. Any excess donation value may be used as a credit against other income that year and up to five years forward.
Usually, the candidate policy will have sufficient internal cash to sustain it for the remainder of the life insured, but the charity can top it up in later years if there is a concern that the policy may lapse.
There will be no further tax effect for the donor after the policy is donated, unless the donor makes further premium payments, in which case the charity will issue receipts in corresponding years. As policy owner, the charity will be beneficiary of the policy on death.
A donor may acquire a life insurance policy for immediate donation to a charity. Arranged properly, there will neither be a taxable disposition nor a donation value for donating the ‘empty’ policy that year. Thereafter, whether as a lumpsum or series of payments, the policyholder may pay premiums to the insurer or gift the cash for that purpose to the charity. Either way, the charity will issue receipts in succeeding years for the direct cash gift or premium value.
If the premiums are more than the minimum required to keep the policy in force, the excess premiums can accumulate tax-sheltered in the policy, growing the value of the death benefit the charity will receive upon death of the life insured.
As above, the charity will be beneficiary of the policy on death, with no further tax effect for the donor at that time.
A lumpsum may be gifted to a charity to purchase an annuity from a life insurer that will make annual payments to the donor. The charity will issue a receipt for the difference between the donated amount over the cost of the annuity purchase. Depending on the age and other characteristics of the donor/annuitant, the annuity income can be mostly or entirely tax-free.
When marketable securities (e.g., individual shares or mutual funds) are sold out of a non-registered account, the difference between fair market value (FMV) over adjusted cost base is a capital gain. For the first $250,000 of a person’s annual capital gains, 1/2 is included in income, with a 2/3 rate applying beyond that. The net-of-tax value could then be donated.
Alternatively, if the securities are donated in-kind to a charity’s brokerage account, the charity will issue a receipt for the full FMV. This has two advantages: the charity receives a larger donation, and in turn the donor is issued a larger donation credit. This could be a one-time donation, or could be carried out in varying amounts in multiple years as part of a donor’s tax-informed retirement decumulation plan.
Corporation donating securities in-kind – When a corporation makes an in-kind donation, a charity will likewise issue a receipt for the full FMV, negating the tax on the capital gain. In addition, the corporation is allowed to record the full value of the capital gain as a credit to its capital dividend account (CDA). The CDA is an accounting device that tracks tax-free surpluses received or generated by a corporation, facilitating their pass-through to shareholders. Note that the CDA credit does not increase cash or other assets that would form a dividend, but rather it allows for dividends that would otherwise be taxable to be received by a shareholder tax-free.
It is possible to donate private corporation shares to charity, but the legal and tax issues for a would-be donor are much more complex than for publicly-listed securities. As well, the charity may be less willing or able to accept such an offer. Qualified professional advice is highly recommended before initiating any action.
Segregated funds (or ‘seg funds’) are sometimes called the insurance industry’s version of mutual funds. Commonly, they are structured as annuities, with their value corresponding to price movements of a pool of marketable securities. When held in a non-registered account, seg funds are open to capital gains treatment, but are also qualifying securities for an in-kind transfer to a charity as discussed above.
Alternatively, the owner could designate a beneficiary on such insurance-based plans, including designating some or all to a charity. On death of that person, there will still be a capital gain on the deemed disposition of it as a non-registered investment, but the proceeds will go directly to the charity, bypassing any probate tax. The charity will issue a receipt for the amount it receives, with the related credit negating the tax on the deemed disposition, and any excess credit value being available to reduce tax on other income in the final year or preceding year.
There are three types of registered charities, all of which can issue receipts for donations as received in all the same forms as already discussed: 1) Charitable organizations, 2) Public foundations, and 3) Private foundations. All types may carry out their own charitable activities, primarily so for organizations, with foundations also able to fund other charities as discussed following.
A public foundation can be legally structured as a corporation or trust. It generally gives more than 50% of its income annually to other charities, but it may carry out some of its own charitable activities. As a public entity, more than 50% of its directors (or trustees) deal with each other at arm’s length, and its funding comes from a variety of arm’s length donors. Those donors have no further legal control over what is done with their donations, with investment and allocation decisions being by those directors or trustees, or internally delegated by them.
Like public foundations, a private foundation can be either a corporation or trust. But in contrast to public foundations, 50% or more of its directors or trustees do not deal with each other at arm’s length, and/or more than 50% of its funding comes from a person or group of persons that guide its decision-making. Despite these close connections, funds must always be used for charitable purposes, and specifically cannot be used for private benefit.
For those who have sufficient wealth to warrant the cost of setup and administration, a private foundation may be desirable for large scale charitable giving wherein they can have a greater say in the charity’s direction. This may mean leaning fully toward active charitable activities or strictly being a funding source for other charities, or anywhere in between.
Where the cost and/or administration of a private foundation may be prohibitive, a donor may emulate many of its features and tax benefits through a donor-advised fund (DAF). In this arrangement, a foundation maintains legal control of donations to the DAF, guided by the donor’s recommendations on investing (including who is to be the investment advisor), and the amount, timing and (charitable) recipients of distributions. Some offer bespoke support services like a distinctive name, web presence, boardroom space and coordination/hosting of advisory meetings.
The foundation will issue receipts in years as donations are received, whether as a lumpsum or series of payments.
Trusts have been around for centuries, used for flexibility, control and protection in personal, business and estate planning. The defining feature of a trust is that title and control of property – being anything that can be owned – is legally held by a trustee, distinct from the trust beneficiaries who are entitled to the use, consumption and income of that property.
While historically trusts could be actively employed to reduce tax, primarily by using graduated tax brackets, this was curtailed in 2015. Since then, graduated bracket use has been limited to graduated rate estates (generally the first 36 months of an estate) and qualified disability trusts. All other trusts are taxed at the top personal bracket of the province where the trust is resident.
Today, tax planning serves more of a supporting or complementary role to a trust’s core purpose, rather than being the focus of planning. In that respect, trusts are still effective as a shield against excess tax, often by strategically allocating income and associated tax liability to make optimal use of beneficiaries’ lower tax brackets.
But regardless of the extent to which tax is an intention or effect of the arrangement, trusts continue to be tax reporting entities. In recent years, trust reporting obligations have significantly increased. This has expanded the scope of affected trusts, the parties required to be disclosed, and the amount of information about those parties.
Federal legislation requiring enhanced trust reporting was first tabled in 2018, with revisions passed into law in December 2022. The revised rules were to apply for 2023 and all future tax years, but the implementation was deferred a number of times, with the most recent revisions in implementation Bill C-15 for the Budget tabled on November 4, 2025.
tabled in tabled i if that lands on a weekend or holiday. For 2024 reporting, the filing deadline is Monday, March 31, 2025.
Just before the 2023 deadline, the Canada Revenue Agency (CRA) announced that “in recognition that the new reporting requirements for bare trusts have had an unintended impact”, bare trusts would not be required to report for the 2023 tax year unless CRA makes a direct request for filings. On October 29, 2024, the agency announced that bare trusts would continue to be exempt from filing for the 2024 tax year. (The remainder of this article includes the effect on bare trusts, as and when they are required to report.)
Under the old rules, a trust resident in Canada was generally not required to file a T3 Trust Income Tax and Information Return unless it had tax payable or it disposed of capital property. As well, CRA generally granted administrative relief from filing where the trust had only nominal income, whether retained by the trust or allocated to Canadian-resident beneficiaries.
Generally, the new rules require that:
Bare trusts are subject to the new reporting rules
Schedule 15 requires information to be reportable on all the following parties, collectively referred to as “reportable entities”. A reportable entity may be a natural person, corporation, trust or other legal form.
The following information must be provided for each reportable entity:
Other than “listed trusts” (see below), the new reporting rules apply to all express trusts, being those created with the express intent of the settlor. According to common law, a trust comes into being once three certainties are in place: that the settlor intended to create the trust, that the subject property is ascertained, and that the beneficiaries are identified. Most often this will be in writing, but the terms may be oral, or both oral and written.
Examples of familiar arrangements that were previously exempt from filing but will now be covered by the new rules (understanding that this is not a comprehensive list), include:
A bare trust is one where the trustee is merely acting as the agent of the beneficiary/ies. Though property title may be in the trustee’s name, the trustee has no significant powers and can only act by permission and/or instruction of the beneficiaries. Examples of bare trusts include:
Under the earliest/2018 proposals, bare trusts were to be broadly subject to the new reporting rules. Pursuant to Bill C-15, CRA does not expect bare trusts to file a T3 return or Schedule 15 for tax years ending in 2025. Certain bare trusts will be required to file for taxation years ending on or after December 31, 2026.
Adults, usually parents or grandparents, may deposit money into a financial account and record the name as being ‘in trust for’ a minor age child/grandchild. Naming an account as such does not in itself suffice to create a trust, but a trust may indeed be proven, according to the facts of the situation. While the determination of this being a trust will open the arrangement to the new reporting requirements, where small dollar figures are involved, it may qualify for exemption as a “listed trust” as discussed further below.
“Listed trusts” are exempt from Schedule 15 beneficial ownership filing.
As a non-exhaustive list:
As a non-exhaustive list:
If a T3 Return or Schedule 15 is not filed as required, a penalty may be imposed. The penalty will be the greater of $2,500 and 5% of the highest amount of the fair market value of all the property held by the trust at any time in the year.
https://www.canada.ca/en/revenue-agency/services/tax/trust-administrators/t3-return/filing-trust-return/what-changed.html