Estate Planning and Charitable Giving

While most people only look at wills as a legal way to distribute personal wealth and assets, a will can also be a powerful tool to help support your loved ones and favourite causes. And leaving a legacy through charitable endeavors holds a special allure for many Torontonians. Not only does it help those charities to receive a financial gift, but it also carries with it numerous tax benefits too.

Interest in adding charitable gifts to succession and estate planning also increases during the holiday season with holiday campaigns and the end of the tax year approaching. That’s why it’s a good idea to take a thoughtful look at how you can maximize your estate, legacy, and succession planning.

After all, integrating charitable giving into your succession and estate planning achieves the goal of helping your favourite charities and reducing your tax exposure. Because of this, more and more Canadians are choosing to work with an estate planning financial advisor.

According to one study, over the last three years the number of Canadians donating to charity in their wills has increased significantly, from five percent to eight percent, with a projected $37 billion in future donations. On top of that, 23% of Canadians are planning or expect to donate to charity in their will.

What Are Different Ways I Can Give to Charity?

When it comes to updating a will, there are numerous ways in which you can donate to charity.

Leaving money to a charity in a will is the most common way. Other popular financial vehicles include stocks, bonds, mutual funds, property art, and even precious metals.

Another popular way to make a future gift is by donating a life insurance policy. You can actually donate a life insurance policy to a charity during your lifetime and be on the receiving end of an immediate tax credit. Or you can defer that donation until you pass away; this results in your estate receiving the tax credit. Either way, in addition to the charity receiving the life insurance policy, it avoids probate, which can reduce costs.

What Are the Tax Implications of Donating to Charity?

Different tax rules are applied to charitable donations made today or deferred in a will. More broadly though, donations made to registered charities are eligible for non-refundable tax credits which can reduce the donor’s overall tax burden.

Again, there are different tax rules and benefits for different types of charitable gifts, which a registered estate planning professional can help you with.

For example, you cannot generally claim a credit for donations that exceed 75% of your net income in any particular year. But, in the year someone dies and the for the preceding year, donations of up to 100% of the net income can be claimed.

Donating stock, bonds, and mutual funds are a great, tax savvy way to give to charity. It eliminates capital gains taxation and the estate receives a charitable donation receipt for the fair value of the shares. Depending on the situation, this could result in significant tax savings for an estate while providing a significant benefit to a charity.

Sharp Asset Management for Your Retirement Planning Needs

Charitable giving in a will benefits both the charity and your loved ones. If you live in Toronto and are thinking of making a gift to a charity, make sure you consider the tax implications in your success and estate planning as part of your retirement planning.

Because Canada’s tax code changes regularly it’s important to contact a professional wealth management advisor, like the private wealth management professionals at Sharp Asset Management, to discuss your various charitable gift giving options. Our estate and financial planning experts can help design a unique strategy that can maximize what you leave to charity and loved ones.

Why trust your legacy with Sharp Asset Management? We are an independent wealth management firm that is 100% owner-operated. We are not affiliated with any financial institution, securities firm or mutual fund company. As a result, our investment decisions are unbiased. Nor do we earn any commissions or fees on investments we choose on behalf of our clients.

All of our investment counsellors are charter financial analysts, the highest level of achievement, and have over 10 years of experiencing managing portfolios. To learn more about investing with Sharp Asset Management, contact us today.