Leaving a Legacy Beyond Your Family
Estate planning is often focused on providing for the people closest to us.
We think about our spouses, children, grandchildren, and other loved ones.
But for some people, estate planning also presents an opportunity to support the causes and organizations that have been important throughout their lives.
Perhaps it is a church or religious community.
Perhaps it is a hospital, university, or charitable organization.
Or perhaps it is a cause that has held personal significance for many years.
Through careful estate planning, charitable giving can become part of the legacy you leave behind.
Why Include a Charity in Your Will?
Many people make charitable donations throughout their lives.
Including a charity in your Will allows that generosity to continue after death.
A charitable gift may be particularly meaningful where an individual has supported an organization for many years or wishes to contribute to its future.
It can also provide an opportunity to support a cause in a way that might not have been financially possible during one's lifetime.
Importantly, charitable giving does not necessarily mean choosing between your family and a charitable organization.
A properly structured estate plan can provide for loved ones while also setting aside a portion of the estate for charitable purposes.
How Can You Leave a Charitable Gift?
There are several ways to include charitable giving in an estate plan.
A Will might provide for:
A specific monetary gift to a named charity;
A percentage of the estate to be distributed to a charitable organization;
A particular asset to be transferred to a charity; or
All or part of the residue of the estate to be distributed among one or more charities.
For example, a person might leave $10,000 to a local hospital foundation while directing the remainder of the estate to their children.
Another person might leave five percent of their estate to a religious institution or educational organization.
The appropriate approach depends upon the individual's assets, family circumstances, and charitable intentions.
Choosing the Right Organization
One important consideration is identifying the intended charitable recipient clearly.
Charitable organizations sometimes operate through foundations, affiliated entities, or separately incorporated organizations.
A hospital, university, or religious institution may have a particular legal entity responsible for receiving donations.
Using the correct legal name can help avoid confusion during estate administration.
It is also worth considering what should happen if the organization no longer exists when the estate is distributed.
A carefully drafted Will can provide alternative directions to help ensure that the charitable intention is preserved.
The Tax Benefits of Charitable Giving
Charitable gifts can also have important tax consequences.
In Canada, qualifying donations to registered charities and other qualified donees may generate charitable donation tax credits.
Depending upon the circumstances, donations made through a Will or by an estate may be eligible for favourable treatment under the Income Tax Act.
In particular, special rules may permit qualifying estate donations to be allocated between the estate and the deceased's final taxation years, subject to applicable requirements.
These rules can sometimes reduce the overall tax burden associated with death.
However, the tax treatment of charitable gifts depends upon several factors, including the nature of the gift, the recipient, and the timing of the donation.
For that reason, charitable estate planning should be considered alongside appropriate tax advice.
Charitable Giving and Family Obligations
Although charitable giving can be an important part of an estate plan, it should not be considered in isolation.
A person may also have legal obligations to certain family members or dependants.
In Ontario, the Succession Law Reform Act allows eligible dependants to seek support from an estate where adequate provision has not been made.
A charitable gift does not necessarily override those obligations.
Accordingly, individuals who wish to leave substantial portions of their estates to charity should consider how those gifts may affect surviving family members.
Good estate planning seeks to balance generosity with existing legal responsibilities.
Discuss Your Wishes in Advance
Charitable gifts can sometimes surprise family members.
A beneficiary who expected to receive the entire estate may not understand why a portion has been directed to a particular organization.
Although individuals are generally free to choose their beneficiaries, explaining significant charitable intentions during one's lifetime can sometimes help prevent misunderstandings.
It may also be helpful to discuss a proposed gift with the intended charity, particularly where the donation involves real property, unusual assets, or restrictions on how the funds are to be used.
Clear communication and careful drafting can make the eventual administration of the estate considerably easier.
Final Thoughts
An estate plan is more than a set of instructions for distributing property.
It can also reflect the values, relationships, and causes that have shaped a person's life.
For some individuals, that means supporting a church, hospital, educational institution, or charitable organization long after they are gone.
With thoughtful planning, it is possible to provide for loved ones while also leaving a meaningful charitable legacy.
If you would like to include charitable giving in your Will or explore how charitable donations can form part of your estate plan, Tonelli Estate Law would be pleased to assist - BOOK A FREE CONSULT TODAY.
This article is for general informational purposes only and does not constitute legal advice.
