A “Blended Charitable Gifts Strategy” refers to the practice of gifting something now, something later (a gift in a Will) and something in between. This strategy gives donors the greatest opportunity to maximize their charitable giving, while taking into consideration their long-term financial needs. There are also significant tax advantages to giving during one’s lifetime, and additional tax advantages when a gift is made from an estate.
Benefits of the strategy
While there are a number of benefits to a Blended Charitable Gifts Strategy for individuals, they also benefit charities; helping them to better plan for future services and demands. The following provides some examples of current and future gifts and their long-term benefits:
Basic blended gift
The most common example of a Blended Charitable Gift involves an initial lower dollar value gift; followed by a relatively larger testamentary gift. The benefits of this include:
• The donor receives a tax benefit while they are alive; and
• At the time of death, the estate receives a tax receipt that can be used to reduce income taxes payable at death.
A better alternative
Another approach is to create a Blended Charitable Gift using a Donor Advised Fund, where a lifetime gift is made to the fund while the donor is alive and also at the time of death.
• Mark and Susan, both 60 years old, have been asked to make a pledge to their local hospital to support much needed research. They decide to use a Donor Advised Fund to facilitate this giving:
– They create a Donor Advised Fund with a $100,000 investment.
– Each year, they can make an annual grant from their Fund to their local hospital to support the necessary research projects.
• Mark and Susan also want to ensure that the hospital will receive ongoing financial support after their death. To achieve this, they implement the following:
– They update their Wills to include a $1 million bequest from their estate to their Donor Advised Fund.
– While Mark and Susan are alive, the hospital will continue to receive an annual grant from their Donor Advised Fund.
– Upon their death, the size of the annual grant will significantly increase, due to the fact that the Donor Advised Fund will receive the $1 million bequest.
• Mark and Susan appoint their two children as the successors to their Donor Advised Fund, providing another benefit to their charitable giving strategy:
– This appointment ensures that the Blended Charitable Gift will continue to exist after their death, and the local hospital will benefit from the annual income it generates to fund the research based projects.
The concept of Blended Charitable Gifts is promising for charities as they work to meet the increasing demands for their services; both in the near term and the future.
Seek professional advice
This article is not a substitute for professional tax advice. Please consult with your tax advisor to confirm the suitability of the Blended Charitable Gift Strategy for your personal situation.
For more information, speak with your BMO financial professional.
BMO Private Wealth provides this publication for informational purposes only and it is not and should not be construed as professional advice to any individual. The information contained in this publication is based on material believed to be reliable at the time of publication, but BMO Private Wealth cannot guarantee the information is accurate or complete. Individuals should contact their BMO financial professional for advice regarding their personal circumstances and/or financial position. The comments included in this publication are not intended to be a definitive analysis of tax applicability or trust and estates law. The comments are general in nature and professional advice regarding an individual’s particular tax position should be obtained in respect of any person’s specific circumstances.
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