Charitable Bequests
By giving even a small portion of their estate to charity, donors can make a significant impact on the causes they care about
An Overview
A gift made by Will is a testamentary gift. A charitable bequest is a gift by Will to a charitable organization. In Canada, bequests are common. According to Planned Giving for Canadians, “a will is one of the most important documents an individual can have. It represents the ability to direct the final settlement of your estate and other affairs. Through a will, one can direct the proceeds of his or her estate to beneficiaries – both charitable and non-charitable. Having a will that is current, accurate and legally binding in one’s province of residence is critical to avoid unwanted legal challenges to one’s estate. Donors leave charitable bequests for a variety of reasons including: to continue support of the causes they believe in, to leave a tribute honoring a family member, or to minimize their estate’s exposure to taxes, to name just a few.
Charitable Bequests
There are four common types of bequests, each of which can be used to make a gift to charity. The choice will depend on the situation with the donor, their heirs and the charity they wish to support.
Specific: either a specific amount or a specific piece of property which is usually paid out before any residual gifts;
Restricted: stipulates that the funds should be used for a specific purpose;
Residual: a share or percentage of the residue of the estate; or
Contingent: a “disaster clause” bequest that names an alternate beneficiary in case the terms of the original bequest cannot be met.
To learn more, and for sample bequest wording, check out our Bequest Basics PDF!
Tax Treatment
At death, there is a “deemed disposition” of all capital property owned. This means that for tax purposes, property is treated as if it were disposed immediately before death and often generates a significant tax bill for the deceased and the estate. Also, unless there is a surviving spouse, the balance of any RRSP or RRIF is brought into income.
Graduated Rate Estate – Gifts Via the Will
Since 2015 gifts in the Will come from the deceased’s estate and not from the individual. However, the Graduated Rate Estate (GRE) can be used to claim a deferred tax credit on the deceased’s return. This is why the GRE is so important in planning a gift via the Will. For more detail on this please consult your tax and estate planning specialists.