We all give to charity in some way, whether it’s with our money or with our time. But putting a gift to charity in a Will can be hard because you will ask yourself: “Am I going to leave my loved ones nothing?”
When you die, your estate will probably get a big tax bill. Giving to charity in your Will can lower or even get rid of taxes, while still leaving the same amount of money to your heirs.
How could this be? Well, it’s not that hard. Canada has some of the best tax breaks in the world to urge people to give more money to charity, especially from their estates. Still, many Canadians don’t know about these perks.
What can happen:
Take Bob and Linda (names changed due to confidentiality), two of my clients who are both in their mid-70s. They worked hard for years, pay their bills, and do their best to plan for their taxes. They are now retired.
We reviewed their estate plan and discovered (to their surprise) that when they died, they would leave behind close to $2.3 million. They were very happy until they found out that their death tax bill would be $541,000. They were going to give the government almost a quarter of the money they had worked hard for.
Bob and Linda never really thought about giving a gift to charity that wasn’t in the form of a cheque.” When they heard about a cause that moved them, they would take out money and give it. So, when I offered that they give a big part of their estate to charity in their Will, they just looked at me like I was “off my rocker”. I had just told them that they were giving the government a quarter of their money. Now I was telling them to give away even more? This sounded a lot like taking money away from their sons, Marc and John.
I described the plan I had in mind, which was for them to leave a big gift to their favourite charity in their will. Simply put, they would leave about $500,000 to charity in their will. This would result in a tax receipt that would lower their taxes by hundreds of thousands of dollars.
What happened? They gave a chunk of their estate to a couple of charities here in Ottawa (in their Will), which lowered their income tax when the last of them dies. They feel good about it and their sons actually get more.
Yes, the Canada Revenue Agency always gets part of your wealth when you die (but at least they can get less if you properly plan). If you could choose between giving to charity and paying taxes, which would you choose? The kicker is that if you give to charities at your death; it may increase the amount going back to your beneficiaries.
Contact us to get started with your Estate Planning or to discuss these types of strategies and the importance of including them in your planning. This is situation specific but can be beneficial if you have a sizeable estate.
