Anyone planning to transfer some of their wealth to a charitable cause, should ask themselves: What is the purpose of the gift?
Including charitable giving in a will can be as much an emotional decision as a practical one. Warm, fuzzy feelings aside, the tax benefits from a donation upon death can significantly reduce – or even eliminate – the tax bill owed by an estate, leaving more of a person’s assets to be distributed as they intended.
Anyone planning to transfer some of their wealth to a charitable cause, says Catherine Kim, an estates and trusts lawyer with Boughton Law,Typically, she says, answers include a combination of wanting to give to a good cause and to mitigate some of the taxes people expect their estate will incur upon death, such as capital gains tax.
However, Michelle Isaak, a partner at DLA Piper Canada LLP, says a tax credit won’t be possible unless the creator of the will is diligent about checking that their charity of choice is registered with the Canada Revenue Agency and correctly named in their will. Flexibility can also be key when deciding how much to donate. Often, charitable gifts are included in a will as either a percentage of the estate or a fixed lump sum – both of which have pros and cons.
“You end up chasing your tail because you make the donation, you report it on your tax return, you get a refund. Now we have more residue, so then you have to continue to make the donations.”
Tax Will Charity Gift Estate Death Executor Donation CRA Canada Catherine Kim
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