Solus Trust Company Limited Article

Does your estate plan have a charitable gifting strategy?

Kristine Love,
Senior Trust Oficer,
Solus Trust Company Limited

It’s always a good time to take care of your estate plans. Even when we’re not faced with a pandemic, anyone can die suddenly, and in the absence of a thoughtful estate plan, your subsequent wealth transfer may not match your true intentions.

  • An estate plan is the process of identifying your wealth and structuring your affairs to ensure your wealth transfer matches your intentions in the most effective manner. The preparation of your Will is the culmination of putting your estate plan in place.
  • A Will is the written document that confirms and directs what your wishes are for your assets after your death.

A significant and often used component of an estate plan is incorporating a charitable gifting strategy. Many Canadians like the idea of giving back to one or more of their favourite charitable organizations and find leaving a gift after they’re gone a worthwhile endeavour. In your Will, you can gift a certain amount or a percentage of your estate to be distributed to a charity. The following is an example of an estate plan incorporating a charitable gifting strategy:

Mrs. W. wanted to benefit both her favourite charities – her alma mater and the local hospital – and her extended family on her passing. She decided to set up two gifts to her charities – one as a residual gift under her Will and one as the designated beneficiary of her Registered Retirement Income Fund (RRIF).

Estate DetailsEstate Plan
Non-taxable value of Estate$2,000,000Legacies to extended family$1,500,000
Residual gift to hospital$500,000
Taxable value of Estate (RRIF)$200,000Gift to university by beneficiary designation$200,000
Total Estate$2,200,000Total Wealth Transfer$2,200,000
Income taxes owing on death$0
resulting from gift by beneficiary designation
Tax credits on $500,000 residual gift available to carry back one year or forward three years*
*The carry forward is permitted as long as the estate is considered a Graduated Rate Estate.

While both methods of making the charitable gifts are effective for tax purposes, there are two added bonuses to the beneficiary designation gift:

  1. The RRIF does not form part of the estate for probate purposes and saves the estate $2,800 in probate fees.
  2. The funds are released to the charity usually within 60 days.

Your advisors can help you determine what type of gifting strategy is best for you.