The ELCIC has produced this information to assist you in the planning of a donation or bequest. Lutheran Planned Giving does not provide or purport to provide legal, tax or financial planning counsel to you. We urge you to consult and rely upon the opinion of qualified legal, tax and financial planning advisors before acting on any of the concepts described here.
Planned giving is the process of choosing gifts with an eye to realizing the donor's philanthropic objectives while maximizing the financial benefits. These financial benefits come largely from the treatment of charitable giving in the Income Tax Act.
Many of the gift vehicles commonly used in planned giving have been available for many years and are quite familiar to most people. Bequests, trusts, life insurance and annuities have been used to make charitable gifts for decades, in some cases centuries.
Despite this fact, planned giving is not a well-established tradition throughout the ELCIC. With some notable exceptions, most congregations have little experience with their members making planned gifts.
Planned giving is a form of financial stewardship. Most of our members know stewardship through their regular offerings. Compared to Sunday offerings, planned gifts:
- are made much less frequently, usually only once or twice in a donor's lifetime;
- come from accumulated financial assets, as opposed to income;
- are significantly larger in dollar value.
God the Creator has blessed us richly. We hold these blessings in trust, as stewards of the bountiful resources of our lives and our world. When we make offerings of our money, time or talents, we follow the example of generosity that God has given us.
Lutheran Planned Giving believes in a donor-centred approach. We are not soliciting gifts for particular programs or institutions. We try to help donors identify their own passion for ministry. If a donor doesn't know where that ministry is carried out, we will offer information that matches a need with the available gift. Our aim is to make the process of gift planning easy and pleasant for donors. We strive to provide service that is both efficient and confidential.
Lutheran Planned Giving (LPG) has a mandate to encourage and enable members and supporters of ELCIC congregations to make planned gifts to the church. This is not a fund-raising program, but a stewardship ministry. Our job is to make members aware of the opportunities to extend their financial stewardship and to expand the mission and ministry of the church.
Lutheran Planned Giving provides services to congregations and individual members of the ELCIC by way of synodical representatives.(contact list)
Services to Congregations:
- presentations and consultation to congregational councils on planned giving and endowment funds, and their role in the congregation
- presentations on planned giving and related topics to other groups, such as congregational dinners, women (ELW), men, seniors, etc.
Services to Individuals:
- information on gift vehicles, taxation, beneficiary names, endowment agreements, bequest clauses, etc.
- private meetings with individuals, couples and families to review personal circumstances and devise appropriate gift planning strategies
Lutheran Planned Giving offers donors their choice of gift types. These include:
- Gifts of life insurance
- Charitable gift annuities, either through the ELCIC or reinsured
- Lifetime gifts of cash, real estate, investments, etc.
A bequest is a gift made in a last will and testament. Bequests are the most common type of planned gift, accounting for about 80% of all planned giving in Canada. Charitable bequests have the following characteristics:
- anyone with a will can make a bequest;
- they are revocable, that is the donor can change his/her mind at any time simply by revising the terms of the will;
- any type of property can be the object of a bequest, e.g., cash, investments, real estate, collections, art objects;
- a bequest clause in a will can name a specific piece of property, or can designate a share or percentage of the residue of the estate as the gift;
- they are open to public scrutiny, since all probated wills are public documents;
- they qualify for charitable gift receipts that can be used by the executor when filing the final income tax return on behalf of the estate.
Of course, having a valid will is a prerequisite to making a bequest. Most people agree that it is wise to consult a lawyer to have a will drawn up. The fee is usually not large for the preparation of simple wills that meet the needs of most people. It is a good idea to review one's will every few years, and change it if there has been a material change in one's wishes or circumstances.
Who should have a will? Virtually everyone. There are few circumstances when a person is better off not having a will. In fact, it is true to say that everyone has a will of sorts. Anyone who dies intestate (without a valid will of their own) comes under the sphere of provincial legislation. These laws contain a formula which governs how a person's property is distributed after their death. The question is, are you happy with that formula or would you prefer to write your own?
There are two ways a person can use a life insurance policy as a planned gift:
- naming a charity as the beneficiary of a policy;
- making a charity the owner of a policy as well as the beneficiary.
These two ways have a number of characteristics in common:
- a donor can use either an existing policy or a new one purchased specifically for this purpose;
- both term and permanent policies can be used;
- policies from virtually any company are suitable;
- the proceeds are paid at the death of the insured by the company directly to the beneficiary, bypassing the estate. Consequently, the gift is received quickly, in private and without being subject to probate fees.
However, the differences are worth noting.
- the gift is revocable, as the donor can change beneficiaries merely by completing and filing forms with the insurance company;
- there is no charitable gift receipt available, either to the donor or the donor's estate.
- the gift is irrevocable (normally the donor completes a form provided by the insurance company called an "absolute assignment", which transfers all rights of ownership to the church);
- there is tax relief available to the donor in the form of charitable gift receipts:
- all premiums paid after the transfer of ownership are considered charitable gifts and are receipted by the church annually;
- the net cash surrender value of the policy at the time of the donation, if any, also constitutes a gift and is receipted by the church. New policies and term policies usually have no cash value.
The CGA is actually a hybrid of a gift and an income-producing investment. Here's how it works:
A donor gives a sum of money, say $20,000, to the church. As part of the arrangement the donor and the church sign an annuity agreement. The church invests the $20,000 and begins making payments to the donor. When the donor dies, the church keeps whatever remains of the principal sum as a gift, and puts that money to work in its ministry programs.
No one can know the size of the ultimate gift with certainty. But the formula is this:
ultimate gift = (principal sum + investment income) - (payments to donor)
An annuity is a contract to pay a fixed amount of income each year (annuity and annual come from the same Latin root). Usually annuity payments are calculated to last for the annuitant's lifetime. This means that the agreement guarantees payment of the fixed amount for as long as the donor lives. It's possible to arrange a joint and survivor annuity on the lives of two spouses, which extends payments to the death of the second spouse.
Annuity payments are determined by the donor's age at the time the agreement is signed. The older the donor, the higher the annual payment. The rate tables used by the church to calculate payments are changed from time to time as interest rates fluctuate. But the payment to the donor never varies once the agreement is signed. This means that donors never have to make investment decisions again, or worry about changing economic factors, as far as the annuity is concerned.
An annuity agreement is irrevocable. Once the principal sum is given to the church it can never be recovered. In this respect a charitable annuity is unlike other fixed income-producing investments, such as Guaranteed Investment Certificates and Canada Savings Bonds.
But in other respects, the comparison between charitable annuities and GICs is quite favourable. The advantages of the charitable annuity are:
- higher rates producing more annual income;
- locked-in rates producing a fixed income that is guaranteed for life;
- income that is at least partially, and at some ages completely, tax-free;
- at older ages, the gift generates a charitable giving receipt that can be used to reduce income taxes in the year the agreement is signed.
A charitable gift annuity will not be the gift of choice for everyone. It will appeal primarily to people who:
- are age 65 or older,
- would like to make a gift to the church,
- have some money in a savings account or invested in Canada Savings Bonds or GICs, would like a higher rate of return than they are getting now, and
- don't need to preserve the invested money for their heirs.
Donors can create charitable gift annuities with principal amounts as small as $1,000. Even though the administration is carried out by the ELCIC, the beneficiary of the ultimate gift can be any expression of the church.
Many people think that planned giving is synonymous with deferred giving. This is not true. A gift made during the donor's lifetime can be a planned gift.
The principal advantage of a lifetime gift is being around to see what the gift accomplishes. Donors can experience great joy and satisfaction from watching their gift bear fruit. Another advantage is the tax benefits that come from charitable gifts. Some people prefer to realize these financial advantages during their life rather than defer them to their estate.
A lifetime gift can be made with virtually any type of property that has monetary value. However, it is always a good idea to check with the beneficiary to make sure that they are equipped to receive and use the intended gift. Cash is never a problem, but gifts of investments, real estate, etc. require prior consultation.
The following are provided to potential donors as examples of the language used to create gifts. You should discuss these examples with a qualified legal or tax advisor in order to ensure that your wishes are fully and accurately expressed.
I HEREBY DIRECT my Trustees to transfer and deliver to [name of congregation or other institution], or its successor body, the sum of ($ ) DOLLARS for the general use of [institution], as the [governing board] in its sole discretion deems advisable. I declare that the receipt of the person with apparent authority to receive same shall be a sufficient discharge to my Trustees.
I HEREBY DIRECT my Trustees to transfer and deliver to [institution], or its successor body, my real property located at [street address, municipality, province] and legally described as Lot , Plan , in the [municipality], to be used by it in its sole discretion as it deems advisable. I declare that the receipt of the person with apparent authority to receive same shall be a sufficient discharge to my Trustees.
I HEREBY DIRECT my Trustees to transfer and deliver to [institution], or its successor body, the sum of ($ ) DOLLARS for the purpose of . I declare that the receipt of the person with apparent authority to receive same shall be a sufficient discharge to my Trustees.
Power to change a restrictive designation but carry out the spirit of the donor's wishes
I HEREBY DIRECT that in the event that unforeseen circumstances make the specified use of this bequest no longer practicable or desirable, the [governing board] of [institution] is hereby authorized to make any changes it may consider desirable, such changes, however, to be in keeping as far as possible with the spirit and general intent of the bequest.
I HEREBY DIRECT my Trustees that in case any bequest made by this Will shall by any reason of the death of a named beneficiary or any other reason lapse, the property so bequeathed shall be delivered, transferred and paid to [institution], or its successor body, to be used by it in its sole discretion as it deems advisable. I declare that the receipt of the person with apparent authority to receive same shall be a sufficient discharge to my Trustees.
If it is necessary to determine the direct successor of said [institution], I direct that such a decision be made by the Bishop of the [name of synod] of the Evangelical Lutheran Church in Canada or his/her designate, or failing them by such other individual as may be designated by the Synod Council of such Synod, and the decision of the Bishop, his/her designate or such other individual as the case may be shall be final and binding on my Trustees and on all others concerned.
Donors may choose which institutional expression of the church benefits from their gift. It is of the utmost importance that the church be properly named in any bequest or document creating a planned gift. Where there is confusion with respect to the name of the organization or with respect to the intended use of the funds, the cost of resolving the confusion will reduce the funds available for the charitable purpose. If the arguments before the court are not successful, then the church will be without the gift that the donor intended it to have.
It is always prudent to confirm the accurate corporate name of the intended beneficiary. If it is not possible to check with the beneficiary, Lutheran Planned Giving can do this on the donor's behalf.
Here are the accurate names of some institutions and expressions of the church within the ELCIC:
- ELCIC "the Evangelical Lutheran Church in Canada"
- Synod "the Manitoba/Northwestern Ontario Synod of the Evangelical Lutheran Church in Canada"
- Synod "the Saskatchewan Synod of the Evangelical Lutheran Church in Canada"
- Synod "the British Columbia Synod of the Evangelical Lutheran Church in Canada"
- Synod "the Synod Alberta and the Territories of the Evangelical Lutheran Church in Canada"
- Synod "the Eastern Synod of the Evangelical Lutheran Church in Canada"
- Seminaries "Waterloo Lutheran Seminary"
"Lutheran Theological Seminary in Saskatoon"
- ELW (national) "the Evangelical Lutheran Women of the Evangelical Lutheran Church in Canada Inc."
- GHDA: "Global Hunger and Development Appeal"
- CLWR "Canadian Lutheran World Relief"
Congregations can provide their accurate corporate name upon request.
A gift may be made without any conditions or strings attached. In that case the donor is telling the beneficiary, in effect, use my gift where you see the greatest need.
Alternatively, the gift may come designated for a specific purpose or ministry. This allows the donor to create a legacy that expresses a passion for ministry in a personal way. When the beneficiary accepts a gift with this sort of condition, it accepts a legal and moral obligation not to use the gift for any other purpose.
Donors should use great care not to tie the beneficiary's hands too tightly. Decades may elapse from the time the gift is made until it is realized. Circumstances may change drastically and unpredictably. The wise donor will seek counsel before making a gift designation final.
In the worst case, the beneficiary may be forced to spend a gift on something that is not really needed. The only alternative is an application to the courts for permission to vary the terms of the designation. This procedure can be both lengthy and costly.
An endowment is a fund designed for the long-term support of the beneficiary. The beneficiary is directed to invest the principal of the gift and not to spend it. The income from the fund supports the work of the beneficiary. The fund is managed by a group of administrators or trustees. Sometimes the investments are chosen to provide growth of the principal as well as income, to ensure that the purchasing power of the income keeps place with inflation.
An endowment restriction may be either temporary or permanent. A donor may direct that the principal be invested and that spending not encroach upon the principal for a period of time, e.g. ten years. After that, the administrators are given the discretion to disburse principal and/or income as needed. Alternatively, the donor may direct that the principal be preserved in perpetuity.
An endowment that is carefully designed and properly managed can be a great resource for the church's mission. It can also be a great comfort to the donor, providing assurance that the gift will continue to do good for an indefinite period in the future.
Some beneficiaries offer donors the option of naming an endowment after the donor or a loved one. Donors should consult with LPG or the beneficiary to determine policies governing naming opportunities.
When an individual makes a gift to a registered charity (such as the church), the charity provides an official receipt. This receipt can be filed with the donor's income tax return for that year. Charitable gifts create income tax credits, which reduce the amount of income tax owing.
The effect of these credits varies somewhat according to the donor's income and province of residence. For example, in 1996 in Ontario, the value of charitable credits varied from about 46-53%. If we ignore the differences and round the number, it means that each dollar of charitable giving produced about fifty cents in reduced taxes. Put another way, it only costs fifty cents to donate a dollar to charity.
There is a limit to the amount of charitable giving which can be used to create credits in any one year. In early 1997 the federal budget announced that the limit would be set at 75% of the donor's net income. Any donations above this limit may be carried forward and used in the five subsequent taxation years. In the year of death, the limit is 100% of income and any unused contributions may be used in the preceding year, again up to 100% of net income.
There are no estate, succession or wealth taxes per se in Canada. However, many individuals are unaware that when they die, they may be passing on an income tax liability to their heirs. In its simplest form, the situation is this. Any income that has not been taxed during a person's lifetime will be taxed at their death.
A person may transfer all of their wealth through their will to their spouse, without triggering any unexpected taxation. But that simply postpones the day of reckoning to the death of the second spouse.
Two examples of untaxed income illustrate the point.
Property that has grown in value since its acquisition is said to have enjoyed a capital gain. Most forms of capital gains are taxed as income when they are realized, although only part of the gain must be included in income (75% is most common).
For example, if a person buys shares in a company at $10 each and sells them later at $20, there is a capital gain of $10 per share. The taxpayer is required to include $7.50 per share in income for that year.
The same would be true of a family cottage. A cottage purchased for $40,000 and sold later for $140,000 would have a capital gain of $100,000.
A person can leave those assets to a spouse without triggering any income tax consequences. But when the second spouse dies, there is a deemed disposition of the assets in the estate, and all capital gains are realized. The estate will have to pay income tax on the gains. If the amounts are large enough, the rate of taxation may be in the top bracket, in excess of 50%. This has the potential of severely reducing the value of the inheritance. In some cases, the heirs may be forced to sell the cottage in order to pay the tax owing.
Taxpayers are allowed to accumulate retirement savings in RRSPs and RRIFs. Both contributions to and growth in the value of RRSPs are untaxed. Income tax is due on any withdrawals from the funds.
The registered owner of an RRSP or RRIF is allowed to pass the assets to a spouse without tax consequence. But at the death of the second spouse, the registered plan is terminated and the entire value is attributed as income in the year of death. The executor or heirs may be surprised to find that the value of the funds remaining in the plan could be cut in half by the income tax due.
Many donors would rather make a donation to a charity than have the same amount paid in income tax. This gives them a greater degree of choice and control over where their money goes and how it will be spent. They also take great satisfaction in knowing that they can put a dollar to work in the church at a cost to them (or their heirs) of only fifty cents. To many people, this seems like good stewardship of their accumulated resources.
Membership in the Friends is open to anyone who makes a planned gift to the church, or has already done so. There are no criteria as to the type, size, timing or beneficiary of the gift. Membership is purely voluntary.
The purpose of the group is to acknowledge people who have made a gift and thank them for their generosity. Friends can also serve as an example of stewardship, serving to motivate others to make gifts of their own.
To inquire about enrolling as a member, donors should contact Lutheran Planned Giving by mail, phone, fax or e-mail.
Phone 1-888-786-6706 ext. 172 or 204-984-9172