May is Leave a Legacy Month in Canada. It’s a time dedicated to encouraging Canadians to think beyond their immediate needs and consider the lasting impact they can make through charitable giving in their estate plans. While the idea of leaving a legacy might conjure images of grand gestures by the ultra-wealthy, the reality is that individuals from all walks of life can make a significant difference to the causes they care about. At its core, estate planning is about determining what happens to your assets after you are gone, ensuring your loved ones are provided for, and reflecting your values. Integrating charitable intentions into this plan allows you to extend your impact and support the organizations that are meaningful to you, long after you are gone.

Why May is for Making Your Mark: Understanding Leave a Legacy Month

Leave a Legacy Month, spearheaded by the Canadian Association of Gift Planners (CAGP), serves as an annual reminder that our passing doesn’t have to be the end of our ability to contribute to society. It highlights the simple yet powerful act of including a charity in your will or other estate planning documents. Many non-profit organizations, from local community groups and hospitals to large national charities and environmental advocates, rely heavily on planned gifts, sometimes referred to as legacy gifts, to fund their critical work. These future gifts allow charities to prepare for the long term, invest in significant projects, and continue providing essential services or pursuing their missions. For many, a legacy gift in a will represents the largest donation they can ever make, enabling a level of support that might not be possible during their lifetime. It’s a chance to make a difference in a way that aligns with your deeply held beliefs and values.

The Cornerstone: Why Your Alberta Will is Essential

At the heart of any comprehensive estate plan in Alberta, including one that incorporates charitable giving, is a legally valid will. Your will is the primary document that outlines how your assets will be distributed, who will be responsible for administering your estate (your executor), and who will be appointed guardian for any minor children. Without a valid will, your estate will be distributed according to the rules of intestacy set out in Alberta’s Wills and Succession Act. These rules dictate a fixed order of beneficiaries, typically starting with your spouse and children, and may not reflect your actual wishes, particularly if you intended to leave a gift to a charity or individuals outside the statutory list.

Creating a will ensures that your intentions are legally binding. It provides clarity and direction for your executor, simplifying the often complex process of estate administration. Specifying this in the will is crucial for those who wish to leave a charitable gift. The will must identify the specific charity, the type of gift (a sum of money, specific asset, or a portion of the remainder of the estate), and any conditions attached to the gift (though it is often advisable to keep conditions flexible to allow the charity to use the funds where they are most needed). An outdated or improperly drafted will can lead to disputes, delays, and potentially render your charitable intentions impossible to fulfill.

Crafting Your Charitable Contribution: Different Ways to Give Through Your Estate

Integrating charitable giving into your estate plan offers flexibility. Depending on your financial situation and philanthropic goals, you can structure your gift in several ways. Understanding the different options can help you decide which approach best suits your circumstances.

Specific Bequest

A specific bequest is a gift of a fixed amount of money or a particular asset, such as a piece of real estate, shares of stock, or an item of personal property. For example, your will could state, “I give the sum of $10,000 to the Canadian Cancer Society.” This type of gift is straightforward and ensures the charity receives a predetermined value or asset.

Residuary Bequest

A residuary bequest involves donating a percentage of the remainder of your estate after all debts, taxes, and specific bequests to other beneficiaries have been paid. This is a common way to make a charitable gift as it allows for flexibility regardless of the exact value of your estate at the time of your passing. For instance, you could specify, “I give twenty percent (20 per cent) of the residue of my estate to the University of Alberta.” The percentage ensures the charity benefits proportionally from whatever remains.

Contingent Bequest

A contingent bequest is a gift that is made only if certain conditions are met. A typical example is leaving a gift to a charity if your primary beneficiary passes away before you do. This acts as a safety net to ensure your assets are distributed according to your wishes even in unforeseen circumstances.

Specific Property

You can also gift specific property, such as real estate, valuable artwork, or publicly traded securities. Gifting publicly traded securities that have appreciated in value can offer significant tax advantages compared to gifting the equivalent amount in cash. When appreciated securities are donated directly to a registered charity, the capital gains tax that would normally be payable on the increase in value is eliminated. This makes gifting securities a highly tax-efficient way to support your chosen causes.

It is paramount to clearly articulate your wishes in your will, using the organization’s correct legal name and charitable registration number. This prevents any ambiguity or challenges to your intended gift.

Beyond the Will: Other Avenues for Legacy Giving

While a will is the primary tool, your estate plan can encompass other assets that can be used to create a charitable legacy.

Registered Retirement and Savings Accounts: RRSPs, RRIFs, and TFSAs

Naming a registered charity as the direct beneficiary of your Registered Retirement Savings Plans (RRSPs) or Registered Retirement Income Funds (RRIFs) is a tax-efficient way to donate. Upon your death, the proceeds of these plans are normally fully taxable in the hands of your estate. However, if a charity is named as the direct beneficiary, the donation receipt issued to the estate can often offset the tax liability arising from the RRSP or RRIF, potentially reducing or even eliminating the tax payable on those funds.

Similarly, naming a charity as the beneficiary of a Tax-Free Savings Account (TFSA) is simple, and the proceeds are transferred tax-free to the charity.

Life Insurance

Leaving a gift of life insurance is another option. You can donate an existing policy that no longer serves its original purpose or purchase a new policy naming the charity as the beneficiary and/or owner. If the charity is the owner and beneficiary of the policy, you can receive tax receipts for the premium payments made during your lifetime. If your estate is the beneficiary but you name the charity as the recipient of the insurance proceeds in your will, the estate receives the donation receipt.

Charitable Remainder Trust and Gifts of Residual Interest

More complex strategies, like establishing a charitable remainder trust or a gift of residual interest, allow you to donate an asset while retaining its use throughout your lifetime. For example, you could donate your home to a charity but continue living in it for the rest of your life. Upon your passing, the charity receives full ownership. These options involve more intricate legal and financial planning and are typically suited for larger gifts.

The Tax Advantage: How Legacy Giving Benefits Your Estate

One of the compelling benefits of making a charitable gift through your estate is the potential for significant tax savings. Under the Canadian Income Tax Act, gifts made by will or designation (like on an RRSP or life insurance policy) qualify for a charitable donation tax credit. Your estate can claim this credit in the year of your death.

The Income Tax Act allows for eligible amounts of charitable gifts made by your estate to be claimed in your final tax return (or the return for the year preceding your death) up to 100% of your net income in those years. Any excess can be carried back to the year before death, up to 100 per cent of your net income in that preceding year. This is a crucial point: unlike lifetime donations, which are generally limited to 75 per cent of your net income, gifts made upon death can eliminate income tax up to the amount of your net income in the year of death and the immediately preceding year.

This means that a substantial charitable gift can significantly reduce or even eliminate the income tax payable by your estate, leaving more of your assets to be distributed to your non-charitable beneficiaries. Your lawyer and accountant can work together to determine the optimal strategy for your estate to maximize the tax benefits of your charitable intentions.

Selecting the Right Charity

Deciding which charity or charities to support is a personal choice. Consider the causes that are important to you, the organizations whose work you admire, and where you believe your gift can have the most significant impact. Researching potential recipient organizations to ensure they are registered charities with the Canada Revenue Agency (CRA) is wise. You can verify a charity’s registration status on the CRA’s website. Donating to a registered charity is essential for your estate to receive the eligible donation tax credit.

When specifying the charity in your will, use their full legal name and include their CRA charitable registration number. This helps avoid any confusion or delays in administering the gift. Consider whether you want your gift to support a specific program or the general operations of the charity. While specifying a program can be appealing, giving to the general fund often gives the charity the flexibility to use the funds where they are most needed, which may have a greater impact. Discussing your intentions with the charity directly can also be beneficial to ensure your gift aligns with their needs and capabilities.

Dispelling the Myths: Legacy Giving is For Everyone

Many believe that leaving a charitable gift in their will is only for the wealthy. This is a common misconception. Gifts of all sizes make a difference. A percentage of the residue of your estate, a specific sum that is meaningful to you, or even a gift of a particular item can provide valuable support to a charity. The collective impact of many modest legacy gifts can be profound.

Another hesitation is that including a charity will take away from your family’s inheritance. Estate planning is about balance. You can prioritize providing for your loved ones while allocating some of your estate to charity. The tax benefits of a charitable gift can sometimes mean that the net amount available for your non-charitable beneficiaries is not reduced as much as you might think.

May’s Call to Action: Secure Your Legacy

This May, embrace the spirit of Leave a Legacy Month. Reflect on your values, consider the impact you want to make, and take concrete steps to build your legacy. Consulting with an experienced Alberta lawyer is the best way to ensure your estate plan is comprehensive, legally sound, and tailored to your unique circumstances, allowing you to leave a footprint reflecting your life and heart.

Getz Collins And Associates: Helping You Secure Your Legacy

The experienced estates team at Getz Collins and Associates, serving clients across Alberta from our offices in Calgary and Strathmore, is ready to provide the empathetic and trustworthy guidance you need in wills, estates, and trust matters. Whether you wish to provide for your loved ones, integrate charitable giving into your plan, or navigate complex estate issues, we offer flexible service options and accommodating fee structures to meet your unique needs. Don’t wait to gain clarity and protect your interests. Contact us today at 587-391-5600 or online to schedule a consultation and begin planning your estate.