Generosity Strategies for the Self-Employed
Sisters and business partners, Janice and Jenn Nelson* run a small but thriving real-estate agency they built up over years of hard work. From the time they were young, they both valued giving to charity. However, being in the real-estate sector, their income was tied to the fluctuating market conditions, so they settled on giving more when times were good and cutting back when business was slow. The Nelsons knew those charities would really benefit from regular donations, but a predictable schedule of giving just didn’t fit with the ebb and flow of their business. Then Janice and Jenn sold a commercial warehouse, incurring a large taxable capital gain, and they realized they were facing an unprecedented opportunity for generosity.
Weighing the Options for Giving
Janice and Jenn didn’t need the earnings from the warehouse sale to maintain their business or lifestyle, so they decided to give the proceeds to causes they cared about. In addition to working with their accountant, the sisters contacted me at Abundance Canada to help them create a giving plan. I met with Janice and Jenn to discuss the various giving options available for self-employed individuals and small corporations.
First, Janice and Jenn worked with their accountant to decide whether to make the donation corporate or personal, as there are different tax implications depending on individual and corporate income levels. To encourage charitable giving, companies that donate to a registered charity are eligible for a tax deduction, meaning they owe fewer corporate taxes. Additional tax incentives are available for private corporations that make donations of publicly traded securities or private company shares. This can be significant for small businesses like the Nelsons’ real estate company. By making a corporate charitable donation, Janice and Jenn were able to support the causes they cared about and reduce their tax liability. However, being self-employed, the Nelsons saw another huge benefit. Making this donation would allow them to end the ‘feast or famine’ cycle that had controlled their giving.
Simple, Easy Regular Giving
Janice and Jen’s corporation made a gift of $600,000 to Abundance Canada and received an immediate charitable receipt for the full amount of their donation. With this type of donation, any amount of the tax deduction may be claimed in the year of the donation and up to five years forward. The sisters set up a family foundation through our Flexible Gifting Fund (a donor-advised fund (DAF)) to provide for their charitable giving for the next 10 years. Now, no matter how the business might be doing in any given year, Janice and Jenn can continue to support the charities they love.
Using Abundance Canada’s services meant the sisters didn’t incur any set up, administration or disbursement fees, and that they would have just one fund to manage but could choose to support as many causes as they wanted from among all the registered charities in Canada. They also appreciated that their donations could be kept completely confidential and anonymous. Janice and Jenn plan to increase the reserves in their family foundation as they are able, and the sisters looked forward not only to giving in the moment, but also to using the foundation to model generosity for their children long into the future.
Giving Solutions for a Growing Sector
Nearly three million Canadians are self-employed**, and experts predict that number will continue to climb over the next decade. While being your own boss offers an enticing amount of freedom and flexibility, it can bring more sporadic income than a traditional salaried position. This often limits regular charitable giving. And while not everyone experiences a windfall like the Nelson sisters did, Abundance Canada offers several options to help self-employed individuals regulate their charitable giving. From creating a family foundation, to setting up a flexible gifting fund or even donating stocks, bonds or mutual funds.
If you’re self-employed and looking to give to charity, Abundance Canada can help you navigate the often-wavy waters of variable income and help establish a strategy for smooth sailing towards increased generosity.
Contributed by Kevin Davidson
Gift Planning Consultant
*Pseudonyms used to protect the privacy of Abundance Canada clients.
**Statistics Canada. Table 14-10-0027-01 Employment by class of worker, annual (x 1,000)