Some taxpayers would like to obtain a donation receipt now, but continue to control the investment of the funds and receive the income and gains from the investments. The individual could create an irrevocable trust whereby he/she would continue to receive the income from the investments, but the capital is turned over to the Church at some point. The time when the capital is turned over could be after a certain period of time, when the taxpayer dies, or, after the spouse dies, etc.
Since the funds are being left to the Church at some point, and this decision cannot be changed, the individual setting up the trust obtains an immediate donation receipt equal to the present value of the investment being transferred.
The use of a charitable remainder trust only makes economic sense for capital of a certain amount and usually it is an older individual that creates these entities.
The funds in the trust are not subject to P.E.I. probate fees.
One should be aware that any appreciated value over the cost of the investment could be a gain subject to tax when the assets are transferred to the trust. However, elections could reduce the gain for tax purposes, but these elections affect the present value for calculation of the investments for donation receipt purposes.
A donor wishes to leave a $200,000 investment portfolio to the Church, but secure the income on the capital for five years.
There is no capital gain on the $200,000. The present value of the $200,000 in five years is calculated to be $164,000.
|Donation based on present value||$164,000|
|Immediate Federal & P.E.I. tax credits:||$77,687|