It was 1994 when we two aging sisters realized that our Rainy Day Fund was making more money for the bank than for us. We bought one share in several Canadian blue chip companies and had them registered in our two names (Joint Tenants with Right of Survivor.) Except for National Bank, which required 100 shares, this was all that was needed to join each company's DRIP and buy more shares, commission-free. Dividends are reinvested automatically, at a discount in a few cases. From time to time, we buy a few more shares.
Each year, the taxable amount of dividends is split between our two tax returns. While this adds to income and can trigger Old Age Security (OAS) clawback, it does qualify for the dividend tax credit. The actual amount of the dividends is added to the adjusted cost base records used to calculate taxable capital gains when the shares are disposed of.
Although values go up and down with the stock market, the trend is significantly up. By the time the federal government reduced the amount of taxable capital gains on shares donated to charity, our Rainy Day Fund was ready to share. With less taxable capital gain being added to income, the OAS clawback concern also decreased. It made more sense to donate shares and get the capital gains tax break than to use tax-paid cash for donations.
We enjoy the opportunity to channel the success of good Canadian companies into support for the priests, sisters, brothers and lay people who are giving their lives to share our faith with fellow Canadians. Catholic Missions In Canada's Winnie Quinn has always lent her expert help. We feel privileged to have CMIC available to ensure that our small efforts accomplish our objectives.
Recently, Canada Revenue Agency eliminated tax on capital gains for shares donated to charity. For seniors, this can be a double benefit since there will be no danger of the capital gain any longer triggering clawback on monthly OAS payments, and we hope to increase our charitable donations.
Are DRIPS a good idea? Yes, DRIPS are a good idea. And we do get a good feeling about being attached to Canadian companies. Despite the 100-share entry requirement, we wanted in largely because the National Bank Chairman Andre Berard, stood so staunchly for Quebec as part of Canada. Then, the shares were around $11; today they are over $60. Twelve years later, we still are aging and, despite having to dip into the fund ourselves from time to time, we are amazed and grateful that there still is plenty to "share."
(The authors of this article prefer to remain anonymous and generous.)