Time and time again, we hear of the unfortunate consequences that can stem from lack of inheritance planning. One of our elderly clients, who had amassed a substantial estate, passed away before she was able to update her Will. We discovered that the beneficiaries she originally named died before her. Next in line to receive her estate, according to the law, was a distant nephew who had very little contact with his aunt and had no idea he was named as a beneficiary. He was left with many difficult decisions and family turmoil as he had to navigate the estate of a relative he barely knew.
I imagine this story may sound familiar to many reading this. In some form or another, you’ve received an inheritance. Perhaps it was from a distant relative or a parent who left you as the executor of their estate.
Estate planning can be an emotionally challenging topic and families generally prefer to keep their financial dealings private, even within their own family. For the families, settling the estate can be made more difficult when the legacy their loved one worked so hard to build is left without any direction.
Planning for your legacy
You can give your family peace of mind by planning your estate and talking to your family about how you wish to be remembered, which may include a charitable legacy.
The way to ensure your wishes are met is through a well-documented Will and powers of attorney. A Will provides an effective means for you to benefit causes that are dear to you, and a power of attorney for property ensures your choice to donate to certain charities continues should you become incapacitated.
Ways to Give
If you choose to do so, there are several ways you can leave your charitable legacy:
Charity as a beneficiary in your Will
Choosing to donate to a charity through your Will has its benefits. You enjoy the use of your assets while you’re alive, and know that upon death, your executors will donate to the charities of your choosing as outlined in your Will. Enhanced charitable tax credits may also be available.
Charitable remainder trust
If you are comfortable living off the income produced by assets, you may want to take advantage of the tax benefits that a living trust can provide. You receive the income from the trust throughout your lifetime, but upon your death, the “remainder” will pass directly to the charity you name as the beneficiary.
Donor advised fund
If you want to create a legacy by donating a lump sum now, but have it spread out to various charities or over several years, consider establishing a donor advised fund. This effectively creates a pseudo foundation for a fraction of the cost of setting up a private foundation. You receive the tax receipt at the time the donation is made, and can then allocate the funds to any of Canada’s registered charities.
These are just a few options to consider as you plan your charitable giving. To learn about what is best for you, speak to your legal and tax advisors for more information.
While seeking professional help is a good place to start, I hope this motivates you to sit down with your family and discuss your financial legacy. The act of passing on your wealth is much more than dollar figures; it’s about ensuring that your wealth endures to benefit future generations.
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