There are lots of reasons people make charitable donations. Some of the top reasons people give to charity are:
- A strong belief in the organization,
- A strong value for social responsibility,
- and paying less tax.
Giving to a worthwhile cause is good for the soul, the community and the pocketbook.
Financially, there two times you can give to a charity. You can give to a charity while you are living, or you can give through your Will after you pass away. When you have a desire to give to a charity in your Will, there are some important things to know.
Specifying gifts in your Will
There are many different ways to give money to charities through your estate:
- By cash. This is simple and straight forward. You can specify a specific amount of money to go to a specific charity or a number of different charities through your Will.
- By source. For example, you could designate the money remaining in a bank account, or the net proceeds from the sale of your car. This approach is also simple and clear.
- By source with limits. This is similar to designating a source of funds but also applying a limit. For example, you could give the money remaining in your bank account, but not more than $10,000.
- By life insurance. Using life insurance policies to give to charity at death can be a great way to ‘supersize' contributions and create a lasting legacy. For more information, check out my past post on Charitable Giving through Life Insurance.
- Shares of public companies, mutual funds and segregated funds. Giving shares of these types of investments has an additional tax benefit. When you donate shares instead of cash, you will not pay capital gains tax and you will receive a charitable donation receipt for the full value of the investments. This means less income tax for you and more money for the charity or charitable foundation!
- An amount equal to the funds remaining in your RRSP or RRIF. When you do this, you effectively give the amount of your RRSP or RRIF, and you get a charitable donation receipt that will offset the amount of income tax you must pay when the RRSP or RRIF is collapsed on your death. This can be done through the will or with a direct beneficiary designation on the RRSP or RRIF.
- A percentage of your estate. Generally, this approach is NOT RECOMMENDED. Whenever you give a gift of a percentage of your estate, the recipient is entitled to a full accounting of your estate from your executor. You probably don’t want the board of directors, the administrators, and the office staff of the charity to have access to the full financial details of your estate.
Many people face financial challenges to dealing with day to day and month to month cashflow. While they may want to give more to charity, the financial pressures of living sometimes prevent people from giving to charity.
Giving money to charities through your estate can be a great way to give back to society and to a community. It’s also a contribution to your legacy.
Do you know of any great inspirational stories about people who gave significantly or uniquely through their will or estate?