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Does your Estate Plan include a Charitable Gift?

By Wills & Estates Team (posts)

Why you should consider the benefits of charitable giving in your Will.

Charitable giving is a great way to make a positive impact, advance a cause that you are passionate about, and leave a meaningful legacy. There are also potential tax benefits that accompany charitable donations, making this kind of gift an attractive tool in estate planning.

Charitable gifts can take many forms.

Cash donations are common, where a Will-maker leaves a fixed dollar amount or a certain percentage of their residual estate to a charity. However, gifts-in-kind, such as art or real estate, are also possible. Some registered investments or life insurance policies allow a charity to be named as a beneficiary. Certain charities will accept donations of publicly traded securities (which allows you to donate the full value of the security without triggering capital gains tax).

Practical Considerations

If you are leaving a charitable gift in your Will, there are some practical considerations to keep in mind. Save your executor from some administrative roadblocks by ensuring that you have correctly identified the charitable organization set to receive the gift. While you might wish to prescribe a specific purpose for the gift, restrictions as to how the money can be used could render the gift unworkable. It is usually worth speaking with a representative of the organization to discuss how best to meet their needs.

What about Wills Variation claims?

If you are leaving a sizeable gift to a charitable organization, you should also consider the possibility of a wills variation claim. In BC, the spouse or children of a Will-maker may apply to the courts to vary a Will that they feel makes inadequate provision for them. Certain strategies, like beneficiary designations, trusts, or other gifts that pass outside the will can be used to reduce the risk of variation.  Transparency about your intentions is also important. For example, providing a written explanation of your connection with your charity of choice will reinforce the gift and help align your family with your values.

Tax Considerations

Leaving a gift in your Will to a registered charity can reduce the amount of tax payable by your estate. When a person dies, their personal representative must file a final tax return in which the deceased is deemed to have disposed of all of their assets. Unless exemptions apply, this will trigger a large tax bill. A tax credit for a charitable donation will reduce this final tax bill and allow you to put your money towards a cause of your choosing, instead.

If you would like to incorporate a charitable gift into your estate plan, our team can help you consider your options, and create a strategy that is right for you. Contact our Wills & Estate Team – we’re here to help.

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