WHY YOU SHOULD GIVE TO CHARITY IN YOUR WILL
You don’t have to be a billionaire like Bill Gates or Warren Buffet to leave a substantial gift to charity in your will.
In fact, it is a great strategy, no matter what size estate you will be leaving behind.
Giving to charity in your will actually means that more ends up in the pockets of your other beneficiaries.
I was speaking recently with clients of mine, Debbie and Laura, who were planning to update their wills.
They are in their mid-60s, having been diligent with their finances and always made a great income. We estimated that their estate is likely worth close to $4,000,000. They planned to leave it all to their three children, for simplicity’s sake.
But for an estate of that size, the amount of estate administration tax payable will be almost $60,000!
Seeing that number was a shock. The government would be taking a sizeable chunk of their estate, despite already having taken a sizeable chunk of their income over their working years!
They wanted to know if there was a way to end up with more for their children.
Leaving a gift to charity will reduce your final tax bill
Over the years, Debbie and Laura have been loyal supporters of various charities and causes. They have always given generously of both their time and money.
In particular, a local LGBTQ+ charity in their community has held a special place in their hearts. They had both benefited from the services of this organization as teenagers and felt it was important that the queer youth in their community continue to have a similar support system.
Although they donated every year, they had not considered giving when they were gone. It had seemed easier to simply leave everything to their children.
But leaving a gift to this amazing organization in their Will would substantially reduce their estate’s tax bill. In other words, they would be giving money to a charity that would otherwise go to the Canada Revenue Agency (CRA).
The organization would get a phenomenal gift (one they couldn’t have afforded to give while they were alive), and there would be proportionally more going to their beneficiaries than to taxes – an overall win!
How can you give to charity in your will?
1. You can leave a specific dollar amount.
2. You can leave a residual bequest where you can donate a percentage or the remainder of your estate after other needs have been fulfilled.
3. You can leave a contingent bequest made on the condition of a certain event.
Your gift can take many forms:
· Life insurance
· Charitable trusts
· RRSPs and RRIFs
· Securities and mutual funds
· Charitable annuities
· Named funds
For example: gifting your life insurance policy can result in a much larger gift for your charity of choice than would be otherwise possible for you to give. You can designate the charity as a beneficiary of your existing policy, or you could purchase a new policy to donate to the charity.
Transferring investments to a charity means that the capital gains will not be subject to tax! Your estate will also receive a tax credit based on the fair market value at transfer. In other words, your estate will get a double tax savings!
You will have satisfaction in knowing that organizations you valued in your lifetime will receive support long after you’re gone and your beneficiaries will receive more instead of the government.
If you want to explore your options for leaving a charitable legacy and reducing your estate’s taxes, book a call.