Charitable donations can be made during life or at the time of death, but the preferred time will vary depending on the analysis of a set of criteria, both financial and personal. Sometimes, good intentions are not linked to financial capacity.
Therefore, it is entirely possible that your financial planning requires keeping all of your assets in order to secure the financing of your retirement.
Your philanthropic desire does not have to be forgotten, however. You could choose to realize your generosity through your will. This would allow you to make a larger donation to the organization or foundation of your choice at the time of your death.
A simple avenue to explore
Thanks to testamentary bequests, your estate could benefit from the tax credit for donations, thus reducing the taxes payable following the tax disposition of your registered assets (RRSP, RRIF, etc.) and other capital assets, particularly rental properties or residences. secondary.
The charitable donation tax credit is generally known to taxpayers who make cash donations during their lifetime. They benefit from it regularly, even every year. This same credit is also applicable to the benefit of the estate when property is bequeathed at the time of death.
If the different avenues of planned donations put you off or your state of health does not allow you to take out life insurance for the benefit of the charitable work that you wish to support, donating by will allows you to proceed in a simple and flexible. This is probably the most significant advantage of a will: donations can be modified by simply changing the will.
It is also possible to allocate a percentage of the estate to gifts, which avoids putting your estate at a disadvantage if your assets erode over the years. For example, it is entirely possible to choose a donation representing 50% of the value of your registered plans rather than giving a fixed dollar amount which, over the years, would take up a larger proportion than your initial wish, following a reduction in the plan balance.
Limits to consider
Although this type of legacy gift is easy and eligible for the credit, it is theoretically entirely possible that your heirs will only benefit from a portion of the charitable gift for the year of death. In fact, the latter is capped at 75% of net income, plus some adjustments related to capital gains and depreciation of certain assets during the year. In this regard, it is recommended to consult experts to find out the detailed criteria and credit limits (federal and provincial) for different charitable, eco-sensitive and cultural donations.
Concretely, this means that if your gift is too high in relation to your income in the year of death, you could put your estate at a disadvantage.
Before changing your will, comprehensive estate planning and support from an experienced financial planning professional are ideal to properly evaluate the different options for planned giving. This support could possibly involve integrating your family members into your philanthropic choices.
However, each family has its abilities and limitations when it comes to discussing such financial choices. From a legal point of view, you should also involve your legal advisors, in order to avoid your legacies being contested by your heirs.
Finally, the gift by will could ultimately be smaller than you wanted, or even be completely canceled, once your creditors and taxes have been paid by the estate. This risk associated with a legacy can be avoided by donating a life insurance policy or subscribing to a charitable annuity, the entire capital of which would go directly to the chosen beneficiary.
If, despite these limits, you choose the option of bequests by will, a minimum precaution is necessary: you will need to indicate the full company name and specify the organizations selected. For major gifts, it is recommended to communicate with management in advance to discuss your intentions, in order to validate their ability to accept your gift.
It is sometimes said that philanthropy expresses the love of humanity, I suggest that we all love according to our means. Some support their children and grandchildren as a priority and instead get involved voluntarily in the community, which is more than perfect. We will see in the next column what options are available to privileged families who wish to make major donations.