A Charitable Guide to Planned Giving

A "Get-To-It" Guide by DeWayne Osborn CPA, CGA, CFP®

Getting Started

1.6.1 - Tax Receipting Planned and Major Gifts

Planned and Major gifts usually cause stress on the tax receipting function of any charity. Why? There are several reasons:

  • The nature of the donations themselves. Most organizations are accustomed to smaller cash contributions. Major and planned gifts often take the form of non-cash property such as shares, land, artworks, etc..
  • Many times, such gifts are not anticipated With direct mail or events, the organization typically knows what and when to expect gifts. Such knowledge comes from years of experience running the event or direct mail campaign. A bequest that is several times the larger than any net revenue from the organization's fund raising activities can arrive in the mail completely un-announced. The anxiety only increases if the property to be received in not cash.
  • With direct mail or events, the chairty generally controls the use of the gifts once received. For example: "the walk to end breast cancer" is going to use the gifts received to assist in the elimination of this dreaded disease. The charity puts on the event with full knowledge of all aspects of the event. However, with major and planned gifts, often the donor provides direction as to how they want the gift used. The charity has to determine if it will accept such direction before accepting the gift. This process is made more difficult on the charity when the gift is of substantial size.
  • With events or direct mail, there is a defined start and stop point that is often completely within the charity's control. With planned and major gifts, years may be required (decades in fact) to complete the gift, and any mistake by the charity could jeapordize the completion, and ultimate transfer, of the entire gift.
  • As mentioned before, with planned and major gifts, the size alone is enough to cause trepidation. However, another unique quality is that there may be no property transferred for decades, and yet a receipt is required (e.g. life insurance).
  • Regulations require charities to disburse certain amounts (called the Disbursement Quota - Charitable Organization or DQ) on strictly charitable activities or risk financial penalties, or even revocation of charitable status and the subsequent loss of all the charity's assets. A substantial portion of the DQ is derived from tax receipts issued in the previous year. Therefore, it is of paramount importance that the receipts issued are correct in all detail and properly safeguarded.
  • A related point to the above is the strict requirement to capture the appropriate information on the tax receipt when it is issued. CRA requires certain information depending on the situation and the property received. A complete listing with examples can be found on their website at www.cra-arc.gc.ca/tax/charities/pubs/receipts-e.html

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