Everything Charities Need to Know About Gifts of Securities

Gifts of securities are a great way for donors to support your charity. A gift of securities is when someone donates stocks, bonds, or other investments to your charity instead of giving cash. This can be a smart and savvy financial move for donors because it reduces their capital gains tax liability and may also reduce their income taxes.

When you receive gifts of securities, they're automatically converted into cash that can be used immediately by your organization. It might seem a bit complicated at first, but we'll break it all down for you.

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What Are Gifts of Securities?

Gifts of securities are donations of stocks, bonds, or other investments to a registered charity. These gifts are increasingly popular because they offer several benefits for both the donor and the charity.

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How Do Gifts of Securities Benefit Donors?

For Canadian charitable donors, giving gifts of securities can reduce taxable income and capital gains, while charities can receive immediate cash from the donation.

Here are two examples:

1. A donor owns a stock that is worth $1,000 but has only paid $500 for it. If the donor sells the stock, they will have to pay taxes on the $500 of capital gains. However, if the donor donates the stock to a charity, they can avoid paying those taxes.
2. A donor has a large number of stocks that have increased in value over the years. If they were to sell all of these stocks, they would have to pay a large amount of capital gains taxes. However, if they donate the stocks to a charity, they can avoid those taxes and also receive a charitable tax deduction.

In each case, the donor would be better off donating the securities instead of selling them.

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How Do Gifts of Securities Benefit Charities?

Gifts of securities are important for charities because they provide a reliable and immediate source of cash. This is especially important for smaller charities that may not have the fundraising capabilities or donor base to support large donations.

When a donor gives a charity stocks or bonds, they can immediately sell them and receive cash for the donation.

This immediate infusion of cash can be used for many purposes, such as covering the costs of running a program, hiring new staff or expanding services.

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How Can Charities Get More Gifts of Securities?

There are some things that charities can do to encourage donors to give securities instead of cash, especially during the year-end fundraising season.

Ensure your charity is registered with the Canada Revenue Agency

Registering with the CRA will ensure that donations of securities are processed smoothly and quickly.

Educate your donors about the benefits of giving securities

Highlight the benefits for donors, some of which include tax savings, immediate cash and avoidance of capital gains taxes.

Explain how to make gifts of securities on your website

Laying out the step-by-step process for how to donate securities will help donors understand how the process works, and makes it easier for them to give investments, stocks and bonds.

Create special events or campaigns that focus on gifts of securities

Promoting campaigns and events focused on donating investments, stocks and/or bonds can help raise awareness about the benefits of donating securities and encourage more supporters to do so.

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How Do Charities Set Up Securities Donations?

CanadaHelps makes accepting gifts of securities easy. When a donor wishes to donate their securities, you can send them directly to your website if you’ve added a Securities Custom Donation Form, or to your CanadaHelps Profile Page to make their securities donation. 

The transaction fee is the same regardless of which of these two ways the donor uses to make their donation.

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What is the Securities Donation Process for Donors?

1. Donors are asked to fill out the online form with some basic information about the shares/funds and some personal details for tax receipting purposes (i.e. full name, address). 
2. Using this information, CanadaHelps automatically produces a “Letter of Direction” which the donor then downloads. 
3. The donor signs the letter of direction and provides it to their broker/financial institution.
4. The broker/financial institution acts on that direction and transfers the requested number of shares from the donor’s investment account to CanadaHelps’ account.
5. CanadaHelps sells the securities on the day we receive them from the donor’s institution, arrange the pledge documentation and materials for the donor, issue the tax receipt to the donor, and transfer the proceeds to your charity 

TIP: You’ll get your funds faster when registered for a Full Fundraising account.

There you have it. Everything you need to know about gifts of securities! If you have any questions, don't hesitate to contact us. We're here to help!