“Planned giving” refers to a charitable donation which can be arranged during your lifetime, but is not available to the charity until sometime in the future.
This type of gift is “planned” because it takes considerable thought and preparation, and because individuals should consult a lawyer and financial planner about it.
The easiest planned gift is part of something someone already has or should have – a valid Will.
(CanadaHelps.org, March 5, 2019)
What are Bequests?
The most common way to leave a gift is by making a bequest – a gift through your Will.
If an individual chooses to leave a gift through his/her Will, he/she will first need to speak to a lawyer who can help draft and complete the Will, or change the existing Will.
Some of the advantages of a bequest include: they are revocable, flexible, simple, may reduce the donor’s taxes (e.g., tax receipt may coincide with substantial income tax liability on death), and ultimately they leave a legacy that will contribute to making a difference.
There are different types of bequests to choose from:
Designate a fixed dollar amount or specific property to Martha’s Table.
Residual or proportional bequest:
Designate either your entire estate or a percentage of your estate after other specific bequests are distributed. The advantage of designating a portion of your estate to Martha’s Table is that the bequest automatically adjusts in size as your estate increases or decreases over the years.
Martha’s Table is only given a bequest in the event of the death of the primary beneficiary named in the will.
A testamentary trust is one that is created as part of the provisions of your will to assure the long-term fulfillment of your wishes. It allows you to devise a trust to provide for the ongoing needs of your spouse and family, while retaining the capital to provide a legacy to Martha’s Table.
THINGS TO CONSIDER
Bequests can enhance the value of your estate, as they may enable you to minimize federal and provincial estate taxes.
Bequests may allow individuals to make much larger gifts than they could during their lifetimes.
Designations for bequests are revocable so you retain control of assets during your lifetime.
Your estate may claim gifts in the year of death equal to 100 per cent of your net income in that year and the preceding year.
There is no minimum giving level for bequests.
( www.mcgill.ca/giving/ways-give/bequests-and-planned-gifts, Thursday, March 7, 2019)
Charities and professional advisors need to encourage individuals to have proper, valid wills. If an individual does not have a valid will, no bequest can be made.
Along with a gift in an individual’s will through a bequest, there are other planning options that offer financial benefits while allowing individuals to achieve their philanthropic goals and leave a legacy to a charity they believe in.
Surrender an existing policy:
Often individuals own life insurance that they purchased for financial security when they were younger. Circumstances may have changed so that the life insurance policy is no longer needed, and the ownership of the existing policy can be transferred to the designated charity. In this case, you receive a tax receipt for the fair market value of the policy at the time of your gift (which may exceed the policy’s cash surrender value).
If premiums are still being paid on the policy, you will receive tax receipts for all future premiums.
THINGS TO CONSIDER
A gift of life insurance may allow you to make a larger gift than you could make from your current disposable income.
The designated charity issues you official tax receipts for premiums paid on the policies it owns.
Your gift will not be reduced due to taxes, fees, cost of probate or administration.
There is no minimum gift level for gifts of life insurance.
Purchase a new policy:
You purchase a new policy and name a designated charity as the owner and beneficiary. You receive a tax receipt for premiums paid each year. The designated charity will receive the proceeds of the life insurance policy upon your death and use the funds to support the area(s) that you have chosen.
Designate a specific charity as the beneficiary of your policy:
You can name a specific charity as a beneficiary of a new or existing insurance policy. Upon your death, the designated charity will receive the proceeds of the life insurance and your estate will receive a charitable tax receipt equal to the policy’s death benefit.
A charitable gift annuity offers you the ability to make a significant gift while enjoying income for life that is largely tax exempt.
THINGS TO CONSIDER
You will receive an immediate income tax receipt for a portion of the gift.
If transferring securities, you may benefit from the elimination of the capital gains tax.
Your annuity provides a lifetime stream of fixed payments for you and/or your co-annuitant, even in volatile markets.
A charitable gift annuity frees you from investment and management worries, with no administrative charges.
Fixed payments may be tax-free, depending on the age of the annuitant(s).
Retirement Plan Assets
Protect your savings
Although you may want your heirs to receive all the assets remaining in your retirement plan, estate and income taxes could reduce its value by close to 50 per cent, leaving your loved ones with only a small fraction of what you had intended.
In addition to the income tax due on the assets, the plan is also subject to federal and provincial estate taxes.
Rather than see your hard-earning savings diminished by taxes, you may wish to consider donating all or part of your retirement plan.
This type of gift is appropriate for single or widowed individuals without dependents, as retirement plans are taxable to anyone other than a spouse or dependent child.
THINGS TO CONSIDER
You are able to make a larger gift than otherwise possible.
You have use of the retirement plan while you are alive.
Designations for retirement plans are revocable, so you remain in control of your finances.
The estate receives a charitable tax receipt for the amount of the gift. Any unused portion can be carried back to the year immediately preceding the year of death, up to 100 per cent of your net income.
When designating your retirement plan assets, please use the charity’s legal name and business number.
In Quebec, you must also state in your will that the specified charity is the beneficiary of your retirement plan, in order to benefit from a charitable tax receipt.
Charitable Remainder Trusts
A charitable remainder trust can be funded with cash, securities or real estate.
Assets are placed with a trustee —an individual or entity capable of managing the trust expertly.
With a charitable remainder trust, you can make a major donation of capital, which is held by a bank or trust company, while you continue to receive the income.
You will receive an immediate tax receipt for an amount calculated according to the current value of the capital.
THINGS TO CONSIDER
You will receive an immediate charitable tax receipt.
If your charitable receipt exceeds the standard 75 per cent of your net income, you can carry the excess tax credit forward for up to five years.
Although there is no set standard amount for a charitable remainder trust, an investment of a minimum of $150,000 is often suggested.
Donating publicly traded stocks, bonds, mutual funds or other securities is a tax-smart way to support Martha’s Table while enhancing your charitable gift.
By donating publicly traded securities, you eliminate the capital gains tax that would be payable if you were to first sell the stock, and then donate the proceeds.
Donating securities is easy! The simplest way to make your gift of stock or securities is to have them electronically transferred from your brokerage account to Martha’s Table brokerage account.
You will receive a receipt for income tax purposes for the full appreciated value of your securities on the day they are received—similar to when you donate cash gifts.
All gifts of publicly traded securities, either being gifted through your estate plans or if being donated today, should be designated directly to Martha’s Table so that the full value of the appreciated investment obtains the capital gains exemption.