Ontario Farmland Trust
November 1st, 2024
Planned giving is a commitment made by a donor and documented in their Will. Here are some important tips to consider as you manage your estate.
Charitable giving is a powerful way to make a lasting difference in your community and beyond. Legacy gifts, or contributions made through your estate, allow you to support important causes even after you’re gone. Besides fulfilling your charitable goals, these gifts can offer significant tax and estate planning benefits.
Bequests in Your Will
A bequest in your Will is one of the most straightforward ways to leave a legacy. Here are some benefits:
- Tax Advantages: Your estate might qualify for a donation tax credit, reducing taxes for both you and your estate.
- Flexibility: You can easily change or revoke the bequest by updating your Will.
- Percentage Gifts: You can bequeath a percentage of your estate rather than a fixed amount, keeping the gift proportional to your wealth.
However, consider these factors:
- Family Rights: Family and succession laws may require you to provide financial support to certain dependants. These laws might limit how much you can leave to charity.
- Probate Taxes: Charitable bequests could be subject to probate taxes, which are assessed before estate distributions.
Donation Tax Credit
When you make a gift through your Will or estate planning instruments (like RRSPs, RRIFs, TFSAs, or life insurance policies), the donation is generally considered to be made by your estate. This results in a tax receipt based on the gift’s fair market value at the time of transfer.
Typically, donation credits are limited to 75% of your net income. However, in the year of your death and the preceding year, you can claim up to 100% of your net income. If your estate is a Graduated Rate Estate (GRE), you have additional flexibility to use the donation tax credit across multiple years.
Planning Your Gift
Effective planning ensures your legacy gift aligns with your intentions:
- Accurate Charity Identification: Use the legal names of charities and reach out to the organization to let them know your plans and confirm that they can accept your gift for its intended purpose.
- Explanatory Side Letter: Although not legally binding, a side letter attached to your Will can help clarify your wishes and address potential questions. Consider also sharing this with your friends and family, so that they understand your wishes, and to inspire them to plan ahead for their own legacy.
- Regular Review: Update your Will regularly, especially if there are changes in your family or assets. Consult a legal advisor to ensure your Will and legacy gifts are properly structured.
Leaving a legacy gift is a meaningful way to support causes you care about while also enjoying potential tax benefits. The positive impact you can make on your community can last for generations. By understanding your options and working with qualified advisors, you can create a plan that reflects your values and meets your charitable goals. Consider different methods of making a legacy gift and choose the one that best aligns with your personal and estate planning objectives.
