May is Leave a Legacy™ Month, which means it’s the perfect time to look at why you should consider leaving a legacy and how you can do it.
For many Canadians, leaving a legacy is an important part of their retirement and estate planning. Whether leaving a legacy means leaving money for children or other family members, many people also decide they want to help causes close to their heart by providing a financial gift.
Leaving a legacy can have a huge, positive impact on many people’s lives, it allows your memory to live on, can help make a difference for those who need it most and it also provides tax benefits.
Planning your legacy
There are around 85,000 registered charities in Canada, so there is a wide range of choices of possible organizations that you could select to leave a legacy. When deciding on which organization(s) to name in your will, there are a number of things you should consider.
Firstly, think about the kind of charitable work that matters most to you. That can help you narrow in to decide which kind of organization would give you the greatest pleasure to provide your gift to.
The types of causes you could support
Below is a list of some popular causes that allow you to leave a legacy in Canada, along with some examples of charities that work in that sector.
It could be that there is a specific organization that has benefited you or someone you know and which you know you would like to support (this can often be the case for medical charities, nursing homes and hospices).
If you prefer to support a locally-based charity but aren’t sure which one, you can simply do an internet search for your preferred charitable cause, plus your home town.
Once you have decided on the organization(s) you’re interested in supporting, it’s time to do some research.
What to look for in a charity when leaving a legacy
The best way to research a charity is through an online search. Alternatively, you could reach out to the charity to ask them to send you a donor info pack. To ensure that the charity is one you feel comfortable in financing, take a look at their mission statement and their financial statements. See what percentage of your gift will go directly to making a difference, rather than admin and marketing costs (if that’s important to you). Research their financial transparency as well.
Look into their planned giving programs or discuss the available options with them. Also remember that you’re not only able to name your chosen organization in your will, you can also specify how they should spend your donation, if they have a particular program that you want to fund.
How to leave a lasting legacy
There are several ways that you can provide financial help to a charity. Some allow you to give while you are still alive and receive tax benefits:
A bequest
This is typically a financial gift left in your will. There are several types of bequest:
- Specific bequest – a specific amount or an investment is given to a charity or organization
- Residual bequest – often a percentage of the amount left over in your estate after all other gifts, debts, expenses and taxes are paid
- Contingent bequest – you can give your entire estate or a portion of it to a charity in the event that your named beneficiary doesn’t survive you
Your estate will receive a tax receipt for the full cash amount of the gift.
A gift of securities
You can donate shares, bonds or mutual funds to a charity of your choice – you pay no tax on capital gains and you or your estate will receive a tax receipt for their full value on transfer.
Residual interest
This is when you give property or valuables (e.g., art or jewellery) to a charity but retain the use of them until a certain time. When they pass over to the charitable organization, you get a tax receipt for their value at that time. The property or valuables are removed from your estate, which can mean lower estate taxes.
A gift of real estate
You can leave a piece of property to a charity in your will and receive a tax receipt for its market value.
An endowment
The sum of your donation is not touched, but instead the income generated from the capital is given to the charity. This means that your gift will keep on giving.
Life insurance
You can name a charity as the owner and/or beneficiary of your life insurance. This can be a cost-effective way of giving a large gift without depleting your assets. Depending on how this is set up, you could receive a tax receipt for the cost of premiums.
Gifting RRSPs or RRIFs
If you leave RRSPs or RRIFs in your will, on your death, the charity receives the proceeds and your estate receives a tax receipt, which can offset the tax payable from withdrawing the funds.
Charitable gift annuity
You transfer a lump sum to a charity, typically through an annuity issuer like an insurance company and you then receive a tax receipt and fixed, guaranteed income for a specified term.
Charitable remainder trust
This is a way to defer your gift. You transfer property, money or securities to a trustee and retain the right to their use for an agreed number of years or until you die. You will receive a tax receipt when the charity receives the assets.
Your chosen charity should be able to assist you in setting up these different types of legacies.
Leaving a legacy with a reverse mortgage
If you would like to leave a legacy before you die, but don’t want it to have an impact on your assets or retirement income, the CHIP Reverse Mortgage® could be the answer.
You can cash in some of the equity in your home and use that to leave a legacy for a cause close to your heart, or provide your family with a financial gift now so you can see the impact it can make. With a reverse mortgage, you don’t need to make any payments until you decide to sell, so it won’t have a negative impact on your retirement income.
Contact us at 1-866-522-2447 to find out how much you could borrow to leave a legacy.
