The Power of Planned Giving: Creating Your Lasting Legacy
In honour of Leaving of Legacy Month, we'd like to share our thoughts with you on the powerful impact of planned giving in our lives and communities.
Did you know that a whopping 22% of our population relies on the help of charities? However, in the aftermath of the pandemic and amidst rising interest rates, a concerning 57% of these charities are struggling to meet these demands. Despite this, only 18.4% of Canadians contribute to charitable organizations.
Many non-profit organizations in our community rely heavily on charitable donations to function. Lakeridge Health Foundation, Hearth Place, Denise House, Luke's Place, Feed the Need Durham, and the Humane Society are just a few of these charities that depend on our support.
We recognize that many want to give, yet are understandably concerned about their own financial well-being. That's where planned giving comes into play, a powerful tool for both estate planning and supporting the causes you care about.
In light of Covid-19, many have felt the need to prioritize estate planning for peace of mind. This includes those without children, who initially named distant relatives or friends as beneficiaries, but realized during the pandemic that these contacts have been absent from their lives. Even those with children who aren't in regular contact are reconsidering their wills. In such instances, I often suggest considering planned giving.
So, what exactly is planned giving?
Planned giving involves naming a charitable organization as a beneficiary in your will. This kind of gift qualifies for a tax receipt, which can offset up to 100% of the income reported on your final tax return. The bequest you make to a charity or multiple charities can take many forms. It might be one or a blend of the following options:
A percentage of your estate
The residual of the estate
A specific dollar amount
Real estate/property
Gifts-in-kind - some organizations reserve the right to refuse gifts that are not of value or benefit
Stocks and securities - more tax benefits if given outside of the will
Insurance policies and annuities - more tax benefits if given outside of the will
Donations of retirement funds: RRSPs, RRIFs & TFSAs - more tax benefits if given outside of the will
Memorial gifts
Not only can these bequests make a huge difference in your community, but they also come with considerable tax advantages for you, making it a win-win situation.
For example, remaining funds in most RRSPs and RRIFs become fully taxable as income in the year of death, typically at the highest tax rate. By naming a charitable organization as the direct beneficiary of these plans, you'll generate a charitable tax receipt that can offset this tax. These types of gifts provide privacy as they are not part of your will, and there is no cost in creating them.
If you're interested in exploring planned giving, my team at SilverBirch Wealth Management would be delighted to help you through the process. We'll assist you in selecting a charitable organization to support, and guide you in researching their mission, financial stability, and impact. My team and I will be happy to provide resources to help you make well-informed decisions.
Real Life Story: An Investment in Kindness
Let's talk about Mrs. A. She was a widow who had built up a hefty $7 million nest egg with her late-husband. It included a gorgeous house in Toronto, RRIFs, and an investment portfolio of carefully chosen stocks.
While she was alive, Mrs. A chose to donate some of her eligible stocks directly to various charities. In doing so, she benefited from the capital gains inclusion rate, which she appreciated as it saved her from paying taxes on the capital gains accrued over years of holding various bank stocks.
At first, she planned to leave everything to her nephews over in England. But when she was hit with a stage 4 bowel cancer diagnosis at the age of 70, she found support in two unlikely places: volunteering at Sunnybrook Hospital and in a close friend who stuck by her side. Her nephews, on the other hand, were noticeably absent. No calls, no cards, not even an email to see how she was doing.
This got Mrs. A thinking about her estate plan, and she decided to make a change. She called her lawyer and me to her home to change her will before things progressed to a stage where she couldn't make sound decisions. Her steadfast friend was to inherit her $1.5 million condo, and the rest, a substantial $6 million, was going to various charities close to her heart. One was Sunnybrook Hospital and another, the Humane Society in honour of her beloved pets.
Mrs. A chose to keep her revised will a secret until her passing. (They might have found out if they had called her just once.) So when her nephews flew in for the funeral and called to discuss the estate, they were met with the unexpected news. Mrs. A's legacy was not a windfall for them, but a monumental contribution to her community and a heartfelt gift to her devoted friend who had supported her in her time of need.
This client’s story is a testament to the impact of planned giving - not just on the charities that benefit, or the savings on her estate’s tax bill, but on the donor's own sense of fulfillment and legacy. Instead of her wealth simply becoming a jackpot for indifferent relatives, it became a lasting legacy of kindness and generosity.
Let's Make A Difference
We understand that discussing your will and estate planning can seem daunting - because it is. However, planned giving can empower you to make an impact on your community, pay less in taxes, and leave a lasting legacy.
If you'd like to explore planned giving in more detail, your team at SilverBirch Wealth Management will be happy to guide you through the process. We're committed to helping you make informed decisions about supporting charitable organizations that align with your values, financial goals, and legacy aspirations.
Sources:
https://indd.adobe.com/view/1fdaa5b9-65af-4325-86e2-628a1f02d797 https://www.ucc.ca/support-us/legacy-planned-giving/