A charitable bequest is a gift made in your will. Bequests can take a number of forms, including a lump sum of money, a gift of securities, a gift of real estate or personal property, a named percentage or portion of your estate, a named percentage or portion of the residue (amount left after expenses, taxes, and other bequests have been paid) of your estate or any of these subject to a contingency such as not being survived by spouse and children.
Bequests can be made for various purposes. Some donors prefer to let the organization decide how to use the funds according to the most urgent needs of the time. Others prefer to direct the funds to the organization’s endowment fund (if applicable) or to specific programs. Talking with the organization will help you determine your best course of action.
Benefits to you?
- You have the satisfaction of creating a significant legacy that will go towards your vision of a better future for your community.
- You retain full control of the gifted property while alive and can change your will at any time as long as you have full mental capacity. Only a modest outlay of capital is required for professional fees in planning your estate and preparing documentation.
- A donation receipt will be issued to your estate for the amount of cash left to the organization or for the fair market value of other property given, resulting in a tax credit on your estate’s final income tax return and tax savings to the estate.
- In the year of death, a gift can reduce the taxes owed by your estate.
Who can create a bequest?
While some bequests are complex (depending on your personal situation and wishes) others are remarkably simple and easy to establish with professional assistance. Some gifts are large, others small, but almost everyone can participate in this form of giving.
Often, people make charitable gifts when revising their wills. Planning opportunities also arise as life’s milestones are reached, including the age of 69 when RRSPs must be converted.
How is a bequest created?
The donor instructs his or her lawyer regarding the charitable bequest. The lawyer prepares a new will or an amendment to your existing will. Many organizations have sample bequest wording available for review by your lawyer and for your use.
An important consideration:
When making estate plans, you must understand what you are doing and do it of your own free will. In other words, the gift must be planned without undue outside influence.
Planned gifts can provide beneficial results for a donor but, in order to ensure that all relevant issues have been considered and addressed and that all Income Tax Act, Canada provisions and regulations are met, prospective donors should seek qualified legal and accounting advice.
Give Green Canada acknowledges and thanks Lorna Somers and Frank Minton for pre-approving the use of their book Planned Giving for Canadians as the basis for the information provided about different types of gifts.