Planned Giving

Planned gifts are popular because they can provide valuable tax benefits and/or income for life.

 Benefits of Planned Giving:

Long term income planning for you or a family member.
Impact on capital gains taxes.
Possibility of increasing current income.
Transfer family assets at a reduced tax cost.
Endowments that will keep on giving for future generations.
Creates the opportunity to make a more significant donation to your community hospital.
Investing in Lambton Hospitals Foundation can provide you with financial advantages today while contributing to quality health care for you, your family and community.

 Planned Giving Alternatives:

Gifts using a will or bequest
Charitable Remainder Trusts
Gifts of Marketable Securities
Gifts of Debt
Securities, Stocks or Bonds
Life Insurance Policies
Residual Interest
Gifts-in-kind and Real Estate
Gift Annuities
Endowments

Gifts by Wills

The majority of planned gifts are in the form of bequests.  A bequest can be personal assets of any kind, such as cash, property, securities or works of art.  Whatever your choice may be, your bequest will be activated after your death.  It does not affect your estate while you are living.  It is a gift that will help to give others a better chance for a healthy future.

Common Types of Bequests:

Specific Bequest

This is a gift of specified items to specific beneficiaries.

General Bequest

This can be a gift of a stated amount of or a percentage of money

Contingent Bequest

This is where certain conditions apply to trigger the response of the bequest.

Residuary Bequest

This is remainder of the estate after all other bequests, taxes, expenses and other financial obligations have been taken care of.

Unrestricted Bequest

This is a gift that has “no strings attached”.  The money or other asset is left without any conditions to how it must be used.

Restricted Bequest

This bequest allows you to specify how the donation may be used.  For example: the money may be only used to buy certain hospital equipment.

Memorial Bequest

This is a bequest left in memory of someone.

Endowment Bequest

This enables you to specify that only interest or income from the assets may be used.  The principal will be kept intact.  Your gift can be a continuing one for an indefinite time.

Charitable Remainder Trusts

This type of trust can be arranged by will (Testamentary) or during your lifetime (Inter-vivos).

It is important to understand that you are giving up ownership of the property to the Lambton Hospitals Foundation.  However, you (and your designated heirs) can receive considerable benefits.

Donor Benefits:

You avoid all or most of Capital Gains tax.
In establishing this type of trust the asset will no longer be part of your estate.  The value of the trust therefore will be outside of your estate.  This means that the trust bypasses the costs of executor fees, legal fees, probate costs, etc.
A lifetime income without management concern.

The Lambton Hospitals Foundation can sell the assets (there is no tax on the capital gain) and purchase fixed income securities which are then distributed to you and/or your designated beneficiary(s) as monthly income for life.

To establish the trust you can use:

Income producing property.
Property of established value.
An asset that has appreciated significantly over the years.

It is possible to arrange this so that you and your spouse receive an income for the lifetime of the last survivor.

You receive an immediate tax receipt (only applies if gift is irrevocable) for the present value of the remainder residual interest.  The capital gains are frozen at today’s value.  Only the capital gains that apply to the residual value must be recognized.

When you give a gift of an asset that has an unrealized capital gain there is a perceived realized capital gain with the transfer of ownership.  If the property has had a depreciation factor effect, then the depreciation must be recaptured and charged against the value.

A subsection of the income tax act permits you to select an amount of value between the fair market value and the original base cost.  This will allow you to eliminate all or most of the effect of the capital gain.  However, in setting this value lower, you must bear in mind that this amount will be used as the basis for your current tax receipt.

In the event that the amount of the gift is over 75% of your net income, the excess amount can be spread over 5 years (under the provision of the 5 year carryforward rule).

Gift of Residual Interest

This is a gift that utilizes the value of such properties as:

A principal residence.
A secondary residence or cottage.
Collection of paintings, stamps or coins.
Antique cars or watercraft, etc.

You can arrange an irrevocable deed of gift of property to the Lambton Hospitals Foundation.  This deed allows you to provide a significant gift to Lambton Hospitals Foundation without losing the use of the property.

You can retain the use of the property for you lifetime (and the lifetime of your designated heirs) or for a specified period of time.  Upon termination the Lambton Hospitals Foundation receives the capital assets/property.

As donor you will receive much the same treatment as under the Charitable Remainder Trust with regard to relief from costs of Capital Gains, probate and legal fees.

Gift of Real Estate

You can give a gift of real estate either in your will (Testamentary) or while you are alive (Inter-vivos).  You will need to provide an appraised evaluation.

Tax Considerations:

Tax credit

50% of value up to maximum of 75% of net income in applicable year or 100% in year of death of donor with one year carryback.

Capital Gains

If property has appreciated, then 50% of the capital gain is included for tax purposes.

Recapture of Depreciation

100% of recaptured amount will be taxed.

Marketable Securities

Securities that are publicly traded are treated more favourably by the Federal tax provisions.  The capital gains inclusion is reduced from a rate of tax of 50% to 25%.  The tax credit of 46% and maximum of 75% of your net income remain the same.  You may use Stock, Segregated Funds, Mutual Funds, as well as employee stock options.  The options are valid as long as stock is gifted in the same year and within 30 days of the option being exercised.

The following chart shows the tax savings comparing to donating the stock to Lambton Hospitals Foundation or selling it and donating the proceeds.

 

Donate Stock

Convert to Cash and Donate
 

Value

$100,000

$100,000

 

Cost

$50,000

$50,000

 

Capital Gain

$50,000

$50,000

 

25%

$12,500

-

 

50%

-

$25,000

 

46% Tax

$5,750

$11,500

 

Tax Receipt

$100,000

$100,000

 

Tax Credit

$46,000

$46,000

 

Less Tax Paid

$5,750

$11,500

 

Net Tax Saved

$40,250

$34,500

 

Note: This example is applicable to current tax laws. 

Please call the Foundation office for updated information.

Life Insurance

Donor Benefits:

Your gift of a life insurance policy will give you:

Payments can generate a tax credit.  This is usually at the time of your largest earnings.
Donation of a paid up policy would give you a tax receipt for the cash value of the policy.
A life insurance gift is separate from your estate and would be outside probate.
You can tailor a policy to fit your cash flow.
A life insurance gift enables you to provide a much larger gift to your community hospital.

The following table gives you an outline of approximate cost for a gift of $25,000.  The example show a Universal Life policy for $25,000 guaranteed on five annual premium payment basis.

Example (premiums approximate)

 Female

Premium – Smoker
 

Premium –Non-Smoker

40

$1,280.91

$1,178.56

45

$1,477.37

$1,332.92

50

$1,731.54

$1,517.60

55

$2,069.61

$1,749.35

60

$2,442.40

$2,075.67

65

$3,049.23

$2,596.89

70

$4,128.13

$3,581.35

 

 

 

Male

Smoker

Non-Smoker

40

$1,378.02

$1,233.00

45

$1,650.74

$1,415.00

50

$1,972.46

$1,645.03

55

$2,456.41

$1,914.56

60

$3,120.80

$2,306.25

65

$4,001.85

$2,955.03

70

$5,507.63

$4,178.00

This table shows that a non-smoking female at age 45 could give a gift of life insurance for $25,000 to Lambton Hospitals Foundation for five annual premiums of $1,332.92.

Tax credits of 46% would reduce this to a net annual premium of $719.78 for a total of only ($719.78 x 5 years) $3,598.90 to provide a very substantial gift of $25,000.

Gift Annuity

By arranging an Irrevocable Annuity with your community hospitals, you will be able to do much more with the money for yourself and family, as well as for your community hospitals.  There are excellent tax advantages as well as possible increased after tax income for you and your spouse.

Donor Benefits:

Lifetime income for you and your spouse.
Worry free investment without any effect from economic changes.
A receipt for charitable income that will increase your current income.
Income is guaranteed through a life insurance company.  By structuring this with a charity you (and your spouse) will receive all income – tax free for life!
The income will not be affected by the clawback provisions from OAS and other tests of income from government benefits.
You will also have great satisfaction in giving a more substantial gift to your community hospitals.

Sample Comparison Chart

The following chart is an illustration to show the benefit of a tax free income under an annuity structured through a charity.

The rates under column:

A:        Are based on a charitable annuity with a tax free income* (see note below)

B:        Are rates just used to show what  you would need to have under a GIC in order to have an income (after tax) to equal the annuity income (tax free).

Female

 

 

Age

A

B

70

6.5%

10.8%

80

7.9%

13.2%

90

11.5%

19.2%

 

 

 

Male

A

B

70

6.9%

11.5%

80

8.3%

13.8%

90

11.5%

19.2%

* Note: For a current rate please call the Foundation Office.

Summary

A representative of the Lambton Hospitals Foundation is available to help you with the many choices available for giving to your hospitals.

We recommend that you confer with your legal and financial representatives before making a commitment.

For additional information, or to begin the planning process, please call the Foundation Office.

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