CHARITABLE GIVING AND ESTATE PLANNING
Leaving Something to the Causes You Care About
Go to the six giving questions
I recently came across an estate-planning guide from the University of Toronto. It dealt mainly with ways to leave a charitable gift, and it got me thinking about the organizations we support over the years.
Through Rotary, my church and other charitable work, I’ve seen people give regularly, often without much fuss. They believe in what an organization does and want to help it continue.
Perhaps you do the same. You contribute to a hospital, a place of worship or a charity that’s helped someone close to you. It’s become part of what you do.
Have you thought about whether you’d like that support to continue after you’re gone?
You might like the idea but wonder whether you can afford it. After all, you still have your own retirement to fund, family to consider and possibly care to pay for later. Those are good reasons to plan the gift carefully.
What can you comfortably give?
This is where I’d begin.
We’d look at your income, savings, insurance and commitments. If you have a spouse, we’d consider what each of you would need if the other died first. We’d also allow for expenses that could increase as you get older, including help at home.
You may find that you can give something now. You may prefer to leave a gift after you’ve finished using your money. Or you may decide to keep supporting the charity as you do today and revisit the question later.
There’s no need to make a commitment before you’re comfortable with it.
Leaving a gift in your will
You can arrange a gift through your will while keeping your assets available during your lifetime.
One choice is a fixed amount. Another is a percentage of what remains after your estate’s debts, taxes and expenses have been paid. The percentage approach allows the gift to adjust with the size of your estate.
For example, a couple may want to remember their church but be concerned about future care costs. Leaving a portion of their remaining estate could allow them to do both: use their money as needed while they’re alive and leave a gift from what’s left.
Their lawyer would need to prepare the wording and ensure it fits with their other wishes.
It’s also worth speaking with the organization. Confirm its legal name and discuss any specific purpose you have in mind. If you want to fund a particular program, what should happen if that program has ended by the time the gift arrives? For donation tax credits, confirm that the recipient is a registered charity or other qualified donee.
Using life insurance
Life insurance is another possibility, particularly if you want to leave a defined amount.
You could retain ownership of a policy and name a charity to receive some or all of the death benefit. With a revocable beneficiary designation, you can change your mind if circumstances change. Premiums generally wouldn’t qualify for donation receipts under this arrangement, but the gift at death may provide a donation tax credit under the applicable rules.
Alternatively, the charity could own the policy and be its beneficiary. Eligible premiums you pay may then qualify for donation receipts during your lifetime. You would, however, be giving up ownership and control of the policy.
These are different decisions, even though both involve insurance. We’d need to look at affordability, how long premiums are payable and whether you need to retain access to any policy value.
An existing policy is worth reviewing too. Perhaps it was bought to cover a mortgage that’s now paid off or to protect children who are now independent. Before cancelling it, find out what it could still do for you.
It may remain useful for your family or form part of a charitable gift. Transferring a policy requires a review of its value and any tax consequences, so that’s something to check before signing it over.
Naming a charity on an RRSP or RRIF
You may also be able to name a charity as beneficiary of all or part of your RRSP or RRIF.
These savings can create taxable income at death, although qualifying transfers to a spouse and certain other beneficiaries receive different treatment. A charitable gift can generate a donation tax credit. How that credit can be used depends on the circumstances and the rules that apply.
I’d want to look at this alongside your other beneficiary designations and your will. If your spouse will need those funds, we need to account for that. We also need to consider what your family will receive and where the money to pay any estate taxes and expenses will come from.
The form is usually the easy part. Making sure it does what you intend takes a little more thought.
Giving during your lifetime
You may prefer to see the benefit of your gift yourself.
If you have funds you can comfortably part with, you can discuss a current donation with the charity. You’ll have an opportunity to learn what’s needed and decide where you’d like to help.
Some organizations also facilitate charitable gift annuity arrangements. Part of the contribution supports the charity, and part purchases an annuity from an insurer to provide income.
Before considering one, you should understand how much is donated, what income you’ll receive, its tax treatment and what happens at death. You also need to be comfortable giving up access to the committed funds. An annuity payment can include some of your own capital coming back to you, so its payment rate isn’t directly comparable with interest on a deposit.
A conversation worth having
You don’t need to have a large estate to raise this subject. Nor do you need to arrive knowing which arrangement you want.
You may simply say, “They’ve meant a lot to our family. I’d like to leave them something, if I can.”
That gives us a place to start.
As your insurance and investment advisor, I can help you review what you need for yourself and your family, and consider how a charitable gift might fit. We can then coordinate with your lawyer and accountant on the details.
You’ve taken care over the years to support something you believe in. It’s worth taking the same care with whatever you’d like to leave behind.
What’s your plan, and have you reviewed it lately?
David D. Seemungal, EPC
Senior Insurance & Investment Advisor
I help people make clearer decisions today, before life forces harder ones later.
General information only. The right arrangement depends on your circumstances. I’ll help you review the options and coordinate with your lawyer and accountant where legal or tax advice is needed.