Better options for giving to charity than through your will

Philanthropy - Keith Thomson, CFP, CIM, FCSIFor many Canadians, philanthropy is an important part of their legacy—myself included.

Unfortunately, when planning how they will give to their preferred charities, many individuals and families do not realize that they can maximize their impact. And the failure to do so means that these well-meaning people are paying needless taxes and are minimizing the amount that they could be giving to the causes closest to their heart.

A recent article I found in the Financial Post brought attention to this issue, outlining several problems inherent in giving money to philanthropic organizations in your will. The highlights are below:

  1. Your will could be contested. Perhaps you have few family members, or perhaps you don’t believe that your family needs the money as much as your dearest charity. Though you have good reason behind your decisions, your family may not see it that way. If your family members who think they should have inherited more contest your will, this can result in legal costs, delays in the administration of your will, and heartache within your family. This troubling possibility can be avoided entirely by using other methods to give to charity.
  2. You miss opportunities for tax credits. If you leave money to a registered charity in your will, you will get a 40-50% charitable tax credit. However, this credit only applies to 75% of your current income for that year. This article gives the example that this becomes a problem if, for instance, your final return shows $80,000 of income and you left 800,000 in your will. You would only get a tax credit for up to $40,000, thereby missing out on $360,000 in tax credits.
  3. You are letting your gift dwindle by paying too much in taxes. What is often the case for many is that the money they’ve designated for charity is left to sit in a non-registered investment account account and is taxed every year. When it finally does go through the estate, the money may also be subject to a probate fee. The final gift ends up being diminished by these taxes and fees.

Instead of giving through their will, consider the following: if you give annually, you can take advantage of tax credits and will have greater flexibility regarding the amount given and the charity receiving the gift. Another option is to take out a life insurance policy and name the charity as the beneficiary, which can dramatically increase the gift that the charity receives.

If you have further questions regarding how to maximize your philanthropic impact, contact financial advisor Keith Thomson.

This material is provided for general information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities mentioned herein and is not intended for, or available to, residents of the U.S.A. or its territories or possessions. Every effort has been made to compile this material from reliable sources however, no warranty can be made as to its accuracy or completeness. Please speak with your investment professional before acting on the information contained herein. All opinions expressed and data provided herein are subject to change without notice and do not necessarily reflect the opinions of Stonegate Private Counsel, a division of CI Private Counsel or its affiliates.


Keith N. Thomson

Comments are closed.