How To Leave a Legacy...
One of the biggest misconceptions about leaving a legacy is that only the wealthy can do it. The truth, however, is that everyone can plan a legacy gift no matter their current income or assets.
Legacy gifts are often referred to as planned gifts, since planning a gift can often result in a significant contribution to a charitable organization. While a commitment is generally made today, the financial benefits are usually not received by the charity until some time in the future. The beauty of planning a gift is that it enables individuals to match their philanthropic objectives with personal goals of providing for their heirs.
Choose a charity.
Think about the charity or cause you’d most like to support. Maybe you or someone you know has benefited from the service of a particular organization. Perhaps you’re an active volunteer or believe in the mission of a specific group.
Call the charity directly and ask to meet with them. Find out what opportunities are available for giving, and how your gift will allow them to continue their work. If you’d like to be recognized for your generosity (or prefer to remain anonymous), ask them about their donor recognition policy.
Talk with your family and loved ones.
Be sure your family is aware of your intentions so they can understand and support your decision. Let them know how you would like to be recognized if the gift will be realized after your death.
Consult the appropriate professionals
Your estate lawyer, financial planner or tax accountant will help ensure the type and timing of your gift is appropriate to your financial situation and maximizes the advantages to both you and the charity.
It’s also best to involve the charity’s planned giving professional. They can help ensure your gift matches their needs. They would also like the opportunity to thank you for your generosity and to learn the story behind your gift.
There are people in our community who can help you make arrangements to leave your legacy. They are members of the Canadian Association of Gift Planners (CAGP), a professional membership organization whose vision is “A better world through strategic charitable giving”.
Charities that want to encourage and help their donors make legacy gifts will often encourage a member of their staff to join CAGP, since they will then have access to current information and educational opportunities in the area of legacy gift planning. Lawyers, accountants, financial planners and other professionals who provide advice to people about their wills, estates and taxes also join CAGP in order to stay abreast of developments in the field.
The following pdf lists the people who are members of CAGP’s Southern Alberta RoundTable.
LEAVE A LEGACY™ encourages you to contact the individuals on this list if you need assistance leaving your legacy.
The most common type of legacy gift is a charitable bequest or gift by Will. This may be a cash donation or even a gift of property such as real estate, a work of art or publicly listed securities.
A bequest to a charity is very easy to put in place and can be modified at any time. In addition, the tax receipt the charity issues may result in a significant tax credit on your final income tax return. (Your estate may claim donations of up to 100% of your net income for the year of death and the year preceding death.)
TYPES OF BEQUESTS
In a specific bequest the donor indicates that the charity is to receive a specific dollar amount, or a specific piece of property, such as real estate, stocks, bonds, or art.
A residual bequest gives the charity all or a portion of the donor’s estate after all the debts, taxes, expenses and other bequests have been paid.
A contingent bequest takes effect only upon the occurrence of some other event. For example, you may choose to make a charity the contingent beneficiary in the event that others named in your Will predecease you.
If you don’t have a Will there is no mechanism in place to make a bequest and your assets may not be distributed the way you would have liked.
A gift of securities provides an innovative and creative way to make a charitable gift and can include stocks, bonds and mutual funds. Federal incentives introduced in early 2006 have made it very attractive to donate publicly listed securities that have appreciated in value. Canadians are not taxed on the capital gain when they donate securities to a charity. This compares to a tax on 50% percent of the capital gain if the securities are sold and then donated.
A gift of life insurance is made when you name a charitable organization as the beneficiary of the policy. This means that the charity would receive the insurance proceeds when you pass on.
There are a number of ways to make a gift to charity through life insurance. You can:
Make the charity the owner of an existing, or new, policy
If you already own a life insurance policy, or if you purchase a new policy, you may make a charity the owner and name it as the beneficiary. You will receive a charitable tax receipt for the policy’s cash surrender value and for any premiums you pay once ownership is transferred to the charity. Premiums can be paid either to the insurance company or directly to the charity.
Name a charity as primary beneficiary, or as co-beneficiary
A charity can be named the beneficiary of an existing policy that you own. This is the preferred option for donors who wish to make a charitable gift but want to retain access to the cash value of the policy, or who want to be able to change beneficiaries if their circumstances change. Because you can change your mind about naming the charity as the beneficiary, a tax receipt cannot be issued for annual premiums. However, your estate will receive a charitable tax receipt when the charity receives the gift and this can result in significant tax savings for your heirs.
You can also name a charity as co-beneficiary with other individuals or charities.
Name a charity as contingent beneficiary
A charity can be made a contingent or secondary beneficiary of a life insurance policy. Should your primary beneficiaries predecease you, the charity, as contingent beneficiary, will receive the policy proceeds. Because you can change your mind about naming the charity as the beneficiary, a tax receipt cannot be issued for annual premiums. You estate will receive a charitable tax receipt when the charity receives the gift.
There are other options available to you if you wish to make a legacy gift through insurance. Contact your insurance or financial advisor for more information
Retirement funds represent a major personal asset for most donors. Donors enrolled in an RRSP, and those who have already converted their RRSP to a RRIF, can make a charitable gift of all or a portion of any retirement funds remaining at death and your estate will receive a charitable receipt for the amount received.
A gift of annuity is made when you make a contribution of cash or other property to a charitable organization in exchange for a guaranteed lifetime income (or for a stated interval of time). It is an agreement or contract between you and your charity. Upon death, the charitable organization would receive the remainder of the original contribution. Depending on the time elapsed the charity may get more or less than the original contribution. If an annuity is started when you are between the ages of 75-90 you can receive tax free income. If an annuity is started when you are between the ages of 65-74 you can receive partially tax free income. Where the income is totally tax free, you will receive a donation receipt equaling the initial amount of your contribution minus your expected annuity income.
CHARITABLE REMAINDER TRUSTS
A gift of trust is made when you decide to make a charitable organization the secondary beneficiary to an irrevocable trust. The primary beneficiary (or the income beneficiary) includes you, and if applicable, your spouse. Throughout your lifetime, or for a stated period of time, you will receive a predetermined amount from the trust. Upon death, the charitable organization will receive the remainder of the trust.
A gift of real estate is made when you leave property, buildings, land, or a place of residence that you own to a charitable organization. This type of gift can be given immediately or specified in your will. When given as part of your estate, you will receive a charitable tax receipt to be used in your final income tax return.