Donating capital property to charity Making philanthropy tax-efficient

1. Donating capital property to charityMaking philanthropy tax-efficient A capital property donation may occur in a current year or at death, and in qualified circumstances a donor may be entitled to tax relief presently while retaining personal use of the property for life. This presentation looks at the considerations that inform a donor as to the optimal manner by which to structure a donation, and how life insurance can make that donation more effective. This material is presented for informational purposes only, and is not a legal, tax or investment opinion to be relied upon either by an advisor or by a client. Interested persons should seek retained independent professional advice before acting or foregoing action in relation to any of the matters mentioned herein.

2. Sales, Tax, Estate Planning, Underwriting & Product Team MISSION • Boost value touches • Broaden options • Case placement assistance • Optimize case values COORDINATION • Account Manager • Front-line support • Assist intermediate • Channeling advanced CRITERIA • No arbitrary hurdles • Generally … • Larger cases • Business cases • Estate/tax issues • Key clients PEOPLE • Lawyers • Accountants, & • Accredited financial professionals ACTIVITY • Resource contact • Seminars • Case consultation COST • No splits or fees • No cost to Client • No cost to Advisor • No cost to MGA

3. Donating capital property to charityMaking philanthropy tax-efficient • Charitable tax credit • Gifts of capital property • Residual & remainder interests • Timing & control • Role of life insurance

4. Donating capital property to charityCharitable tax credit • Two-tier tax credit structure • Credit on donations up to $200 is at the lowest federal tax rate • Credit on donations over $200 is at the lowest federal tax rate • Corresponding provincial credits • Offset up to 75% of net income • Up to five years carryforward for unused credit • In year of death • Offset up to 100% of net income • Carryback offset up to 100% of net income in year prior to death

5. Donating capital property to charityGifts of capital property • At any disposition, capital gains & recaptured depreciation are taxed • Gift is a deemed disposition • When gift is made to a charity • May elect disposition value from ACB to FMV for both capital gain tax and charitable credit • Capital gains inclusion rate • 25% rather than usual 50% • Prescribed securities& funds, and ecologically sensitive lands • No tax on principal residence

6. Donating capital property to charityResidual & remainder interests • Current tax credit • Continue to use property for life • Two common forms used • Residual interest in real property • Charitable remainder trust • Qualifying as a gift • Identification, size of interests, vesting, & all conditions satisfied • Valuing the interest - Actuary • FMV, life expectancy, interest rates & case-specific factors • Using a testamentary trust

7. Donating capital property to charityTiming & control Lifetime donation Donation at death Remainder/residual Value of donation FMV FMV Portion of FMV Evidence Evidence Actuary Charitable tax credit Current At death Current100-400% 100-200% 100-400% Control To Charity Donor for life Donor for lifeImmediately & Revocable to Irrevocable to irrevocably charity at death charity at death Ongoing costs Charity Donor for life Shared

8. Donating capital property to charityRole of life insurance • Value recovery for residual beneficiaries • Replenish the estate • Maintenance for surviving spouse • Support surviving spouse for life • Leverage the charitable gift • In effect, donate twice