2014 Federal Budget – Changes to Charitable Donations
March 03, 2014
The federal budget proposes to increase flexibility to Executors in the tax treatment of charitable donations made by an individual at their death through a bequest in their Will.
During your lifetime, Canada’s tax rules allow an individual, who makes a charitable donation to claim an income tax credit calculated on the fair market value of the donated property. You are limited each year to claiming donations up to a maximum of 75% of your net income. Donations not claimed in a year can also be carried forward for any of the next five years.
In the year of death, a charitable bequest, or designation of the proceeds of an RRSP, RRIF, TFSA or life insurance policy to a charity, is treated as having been made by the individual immediately before death. The value of such gifts, up to 100% of net income can be deducted in the deceased person’s final tax return. Any balance over 100% of net income in the year of death can also be carried back to the prior year. Such gifts are very beneficial in reducing income tax payable by the Estate.
2014 Budget The 2014 budget proposes to introduce additional flexibility to the Estate Trustee. Instead of the donation being deemed to be made immediately before death, charitable donations/designations will deemed to have been made by the Estate at the time the gift is paid to the charity. This is usually in the first year after the date of death in most situations. The charitable deduction can be claimed in either the tax year the bequest is paid, the year of death as part of the final T-1 return, or be carried back to the last two taxation years. To be eligible, the charitable gift must be paid to the charity within 36 months of the death of the individual.
Bottom Line It sounds complicated, but the bottom line is that gifts to a charity from an estate, by way of a bequest or designation can now be reported in several ways, allowing the Estate Trustee the opportunity to fully apply the value of the gift against income tax payable in the year of death, or reduce tax payable in the two years prior to death. There is now a greater opportunity to ensure that a charitable donation can be used to reduce taxable income of the taxpayer in a manner most advantageous to the estate.
The changes are expected to be applicable to deaths/estates which occur after 2015. It affords a new and welcome degree of flexibility in managing the taxation that arises in an individual’s estate.
What Defines Character in a Leader
February 24, 2014
I recently attended a leadership program at the Ivey School of Business. It involves a lot of reading and I found one article interesting and I think useful for board members and arts managers who are hiring for a new position. As well as skills and experience that we look for in a candidate, this paper referenced three particular criteria – competencies, commitment and character. One of the more difficult elements to assess is leadership character.
Competencies and Commitment When hiring, competencies matter – they define what the candidate is able to do, the skills he/she will bring to the role. These include intellect, organizational, business, people interaction and strategic thinking. As well commitment is critical, as it indicates the degree to which an individual will be willing to want to, and do the challenging work of leading an organization – will they be engaged in their role, show you that they are prepared to invest what will be necessary to be successful.
Character The article became most interesting in the commentary about character. As the authors state – “..character counts.” Character will determine how a leader perceives the environment in which they work, it determines how they will apply the skills and competencies they have and shapes the decisions to be made. Character influences what information a leader will look for, consider and how they interpret it and then implement.
The article defines character in three dimensions:
Traits, such as open-mindedness or extroversion. They will predispose a person to behave in a certain way.
Values, such as loyalty and honesty, which are deeply held beliefs about what is right/wrong – what it makes sense to do in an organizational context
Virtues , such as courage or accountability – behaviors that are demonstrative of a ‘good leader’
Character is described as comprising 11 dimensions – integrity, humility, courage, humanity, drive, accountability, temperance, justice, collaboration, transcendence and judgment. The article describes each in depth and illustrates how it connects with the qualities you are looking for in a leader. As an example, integrity is described a wholeness and soundness of leadership character. It will be apparent in principles such as honesty, candor, transparency and authenticity.
In most hiring processes, in both business and not for profit worlds, much time has been spent by human resources groups on developing competency profiles and ways to assess/measure those competencies. Much less effort has been placed on character. Character reflects the capability of a person that may not be immediately evident. It may seem to be subjective, but the article tries to describe appropriate behaviors and measures that can identify the dimensions of character within an overall assessment of an individual.
Character is revealed by how people behave in situations. To uncover more of a person’s character during the hiring process, it is important to conduct an extensive examination of the person’s life and work history – in good times and bad. You learn more by asking how the candidate responded to a fact situation in their past, than by asking how they would respond to a future, hypothetical situation. Integrating character and character development into the hiring/selection process may help identify the best candidate from a group of several well qualified, experienced individuals you are considering.
A Leadership Forum organized by the University of Southern California, titled Philanthropy,: Imagination, Innovation and Impact contains a series of short, very readable commentaries on personal philanthropy. One couple, who have pledged to give away one-half of their personal wealth to philanthropy summarized five principles that have guided their thought process about giving back. They are simple, but well worth repeating here:
Principles of Giving Back
1/ Passion – If you don’t have a passion for giving, or a particular cause, consider spending your time elsewhere. Without a personal passion, you won’t be effective.
2/ Strong leadership – Leadership at all levels of a grant making/gift giving organization is important for making meaningful change. Leadership can take a variety of forms and come from unlikely places – it influences how you make decisions, how your energize staff and sustain a resilient organization.
3/ Involvement – personal involvement leads to better decision making. You will have a deeper impact, than simply writing a check to an organization.
4/ Measurement – Pay attention to the impact of your gifts and support, so that you can see the difference you are making and how you might do it better
5/ Lastly, be flexible and open to adjustment. Effective philanthropists need to be willing and able to adapt and respond to the constantly evolving challenges that face the organizations you support