How to make charitable giving part of your financial plan

You know you can’t take your money with you when you die, but have you thought about what your legacy will be? You’ve worked hard to contribute money to investments, and you can continue to invest in important causes after your death.

Like all financial purchases, charitable giving shouldn’t be a spontaneous act. Planning ahead can help you feel good about where your money will go and also maximize available tax benefits for your estate.

How much should you give to charities?

While you may choose to donate through a percentage of your income during your working years, after your death there are some other options for your estate. Your financial advisor can work with you to help you understand the tax implications—some of which can benefit your estate.

If you have a favourite charity, you likely know a dollar amount they could use. You may want to contact the charity and explore options if you’re interested in leaving your name on your legacy. Charities will often name initiatives after people who have donated within specific dollar amount ranges.

You don’t need to necessarily choose between your loved ones and your favourite charity. You can choose to leave a percentage of your estate to each. 

Benefits of giving to charity (tax benefits, tax planning)

If you’re thinking of leaving money to a charity after you die, it’s important to consider now how to maximize the potential benefits as part of your overall strategic financial plan. In addition to leaving a positive impact on the world, there are also some tax benefits from charitable donations, which are explained below. I can help you understand additional provincial tax benefits, which vary depending on the province.

How do you leave money to charities?

One way to do this is through a bequest, which means you name a charity as a beneficiary in your will. You can choose to leave a specific dollar amount, a percentage of your estate or a specific asset. This asset could be land, a culturally significant item or a work of art.
If you don’t yet have a will or haven’t updated your will recently, you can leave money to charities by naming the charity as a beneficiary of your life insurance policy or other investment, such as a tax-free savings account (TFSA), registered retirement savings plan (RRSP) or registered retirement investment fund (RRIF).

Naming a charity as a beneficiary of a life insurance policy

One advantage of naming a charity as a beneficiary of your life insurance policy is the charitable gift is considered separate from your estate and is not subject to probate taxes. Some life insurance policies offer charitable giving riders that pay out a percentage of your estate to a named charity, without subtracting that amount from what your beneficiaries receive.  I can help you explore the options available to you.

Naming a charity as a beneficiary of another type of investment

You can also name a charity as a beneficiary of an investment account, such as a TFSA, RRSP, RRIF, which allows your executor to claim a charitable tax credit for your estate in the amount of your donation. Your estate can claim a tax credit of up to 100% of your income in the year of your death.

Can you name a charity as a beneficiary?

Yes, if you choose to leave all or a portion of your estate to charity, you can name a charity as a beneficiary on any of the above. If you name a charity as the beneficiary of a life insurance policy, you still own the policy while you’re alive. That means you can change the beneficiary if your life circumstances change.

How do you name a charity as your beneficiary?

This is a simple and easy process. It’s your choice if you’d like to name one or multiple beneficiaries. You may want to also name a charity as a contingent beneficiary. That means, if you name your spouse or another family member as the primary beneficiary, but should that person die at the same time as you or before you, the charity would receive the full benefit. You’ll want to ensure you include the charity’s full legal name, their address and their registration number.

Contact me to discuss how you can make charitable giving a part of your financial planning.