There is a belief that making a significant gift to charity means disinheriting your family and friends, sometimes referred to as “zero sum estate planning.” But nothing could be further from the truth. Including charitable giving in the planning process can be like adopting another child while disinheriting the tax man.

As part of a holistic wealth management approach, it is important to understand all of the tax planning opportunities available, especially those that enable the donor to successfully achieve their charitable giving objectives.

One highly effective use for outright gifts of capital property is to eliminate capital losses or gains. Allowable capital losses can be carried back three years and forwarded indefinitely to offset capital gains. When a gift is being contemplated, often future and or past capital property transactions should be considered.

One of the best kept secrets: The Capital Dividend Account - Donating securities can be a great way to save tax, but for clients who hold publicly-traded securities within an investment holding company there can be an even greater opportunity for making tax-efficient charitable donations.

The Refundable Dividend Tax on Hand (RDTOH) is an important notional (not real) account on the books of Canadian private corporations.  It has two important components: (1) a refundable portion of Part I tax on investment income (capital gains and interest only); and (2) a refundable portion of Part IV tax on taxable dividends received from unrelated companies.