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Bequests
A charitable bequest is a distribution from your estate to a charitable organization through your Will. There are different kinds of bequests. Examples include:General Bequests: left to certain causes from the general value of the estate. These are made by a specific designation: a dollar amount, a certain asset or a percentage.
Specific Bequests: a particular item or property is left for a designated purpose. (i.e., a dollar amount to be used for a specific ministry or to help restore a church)
Residual Bequests: leave the residue portion of your estate to the charity after other items of the will have been taken care of.
Securities - Stocks, Bonds, Mutual Funds, GICs
This is a popular way to make a planned gift during your lifetime. It is easy to do and the tax advantages are substantial. In some ways, donating securities can be smarter than donating cash.Here’s a sample scenario: you wish to donate $50,000 to the Church through the parish, the diocese or one of the foundations featured in this issue. Let’s assume you bought $25,000 in stocks a decade or two ago and they are now worth $50,000.
> Option A: Sell the stock and donate the cash. If you simply sell the shares, you have a capital gain of $25,000. There is a capital gains tax that must be paid (up to 46%), that would result in a tax savings of around $11,500. Net cost to donate $50,000: $38,500.
> Option B: Donate the stock.You get to claim the entire $50,000 as a tax deduction and you don’t have to pay any capital gains tax. The tax savings would be around $23,000. Net cost to donate $50,000: $27,000. Taxes avoided: $11,500.
You can even donate your income taxes! You can give up to 100% of your income tax when you die. If you don’t choose where it goes, the government will decide for you. For the year a person dies and the year before that, this limit is 100 percent of the person’s net income.
Please consult your financial planner or tax advisor for details unique to your personal financial situation and needs.Forms and Information
- Charitable Donation of Shares Authorization Form
- Donating Appreciated Securities (from BMO Nesbitt Burns)
- Sample wording for your Will
Life Insurance
Donating a life insurance policy is another planned giving option. Depending on how it is structured, you can receive tax savings while you are still alive and paying premiums. There are two main options when considering making a planned gift of life insurance:> Option A: Assign the policy to the charity as owner and beneficiary. The annual premiums qualify as a tax-deductible donation on your annual income tax return. You can also transfer ownership and beneficiary of an already existing policy.
> Option B: You retain the policy and name the charity as the beneficiary. Although you cannot receive tax deductions from premiums, you will receive a donation tax receipt from the beneficiary charity from the amount it receives from the policy upon death. This could help with capital gains, RRSP and income taxes.
Need Help?
We would be happy to assist you if you have any questions or need assistance, please contact Andrew Jardine, Chief Financial Officer, at 519-433-0658 or ajardine@dol.ca.
When planning your legacy and writing your Will, you should consult with your financial planner, accountant and/or lawyer.