Planning on leaving money to charity in your estate? You can reduce your tax bill substantially and leave more for charity and your family by donating stocks in kind, while you’re still alive. For example, Ross McShane gives the example of someone who bought $10,000 of Royal Bank shares years ago. Today they’re worth $20,000.
- When you pass away, your estate will pay tax on half of the $10,000 capital gain, which would amount to $2,300 in your are in a 46% tax bracket in the year of your final return. You get a credit of $9,200 in provincial and federal tax for the donation. After the capital gains tax, your estate enjoys net savings of $6,900.
- Consider what happens with $20,000 in RBC stock while you’re alive. You don’t need to report the capital gain and still get the credit of $9,200 meaning there will be more money left in your estate for your heirs. Ask your accountant to calculate the benefit.