Leaving a legacy
There are so many options designed to help you to use a portion of your estate to benefit a good cause when you pass away. The estate planning process helps you to ensure that your estate is distributed as per your wishes and in the most tax efficient way as possible, but legacy planning goes further than this and aims to involve your family and loved ones in your plans to make a difference according to your personal values. The input of your family in this process should not be underestimated – they play a critical part in supporting the process to make your wishes become reality, so be sure to share your thoughts and intentions with them in good time.
In which ways can I leave a legacy?
- Gift your real estate
Your will can state your intention to gift a property to a charity. If you choose this option, your estate will benefit from a tax receipt which can be used against any final taxes to your estate.
- Name a charity as your life insurance beneficiary
You can choose a number of beneficiaries to your life insurance and may decide that a charitable organization should be one of them. Again, your estate will not pay taxes on this gift.
- Leave a charitable bequest in your will
The most common and easiest way to donate money is to add a charitable bequest to your will, though you should be aware that it is likely to increase probate and/or executor costs.
- Charitable remainder trusts
This involves naming a charity as the second beneficiary after yourself and spouse, who will receive income from the trust during your lifetime. After your death, said charity will receive what is left.
- Using RRSPs and RRIFs
It is possible to avoid probate fees and also have your estate receive a charitable tax receipt to minimize tax, by adding a charity as a beneficiary of your retirement plan.
- Annuity agreements
This process works by agreement between yourself and the charity whereby you provide them with funds in exchange for a guaranteed income for a set time period (often lifetime). When you die, they will receive what is left of your original contribution. Tax breaks are available depending on your age at the commencement of the annuity (ages between 75 and 90 years of age is tax free, whereas ages 65-74 benefits from a partial tax break).
- Residual interest
You are able to gift an item of your property to a charitable organization upon your death. This allows you to enjoy the benefits of it during your lifetime (it could be a property or an art collection, for example) but allow the charity to take advantage of its value in the future, as well as your estate receiving a tax receipt for the value of the property at the time of the gift.