If you include a charitable bequest in your will, the charity may miss out if the will is not drawn up properly.
It’s important to ensure that the charity or charities you have chosen actually receive the monies you want them to have.
Verify that the receiving organization is a registered charity with CRA, otherwise your estate will not receive any tax benefit.
The Canadian Revenue Agency (CRA) has a list of Canadian charities. You can search to see if a charity is registered under the income tax act. This is important for donation receipts and income tax purposes.
Here's the link to the CRA web site.... Charities Listings
If you have a business number obtained from the CRA’s website, then the charity has charitable status.
The Correct Name
An incorrect charity name is the most frequent problem encountered. It is also very easy to avoid.
Many charities have similar sounding names. This can lead to conflict between different charities claiming entitlement to the charitable bequest. Use the correct legal name of the charity when drafting a bequest provision.
If you ask the charity to provide you with their business number and correct name this will simplify matters for your executor.
Make it clear what the charity is to receive, a percentage of your estate or a specific amount. Lack of such clarity can encourage litigation.
Capacity of Testator
If you become mentally incapable you will not be able to execute a will.
Waiting too long can result in not being able to provide a charitable bequest to your favorite charity.
Revocation of Wills
This can occur if you marry or remarry and do not redo your will (unless the will was made in contemplation of marriage).
In these cases the original will becomes revoked and the charitable bequest in it will not occur.
For charitable bequests other than cash (real estate, personal property, private company shares etc.), it’s important to discuss the proposed gift with the charity ahead of time.
For real estate, the concern is with environmental contamination and attendant liability. Also, some real estate interests may not be easily marketable or easily valued.
Private company shares can be difficult to value and sell. Many charities have gift acceptance policies. It can be useful to review these.
The charity should have the discretion to use the funds in the manner that will achieve the greatest good.
Many charities have to decline gifts because well intentioned restrictions and conditions are not feasible.
To ensure that the charity receives your bequest, you may want to provide the charity with a copy of the will.
Alternatively an excerpt, dealing with the charitable bequest, can be useful
A bequest in your will to a registered charity will usually generate an official donation receipt. This can be used as a credit against up to 100% of your income in the year of your death and the preceding year.
In the final year, many people have substantial income and the donation receipt can be used to offset some or all of that income.
Bequest of a Complete Estate
An official donation receipt for a large estate will likely be far greater than the income in year of death and the previous year. Therefore, the official donation receipt may not be utilized fully.
It may be prudent, from a tax-planning point of view, to arrange for some inter vivos (whilst you are alive) donations as well as a large, but reduced, bequest.
The inter vivos donations can be utilized against up to 75% of current income and carried forward for 5 years.
The estate may end up not owning the property that is the subject of the bequest. In this case, there may be insufficient funds for the payment of a specific bequest.
The asset may be owned with a spouse, with a child who is a minor, with an adult child who is dependent or an adult child who is not dependent.
Either a presumption of advancement or a presumption of resulting trust may be applicable if the intention of the testator cannot be proven.
Depending on which presumption is found to be applicable, it could result in the gift to the charity never happening or happening in a far reduced manner.
Beneficiary designations, for example with life insurance, RRSPs or RRIFs can either facilitate or defeat a bequest.
In certain situations, if these items are designated to the estate, then there may be sufficient assets to pay the bequest.
If these items are designated to another beneficiary, then the estate may not have the funds to pay the bequest.
Check your will to ensure that the bequests you have made are structured in such a manner that leaves no doubt as to which charity or charities receive your generous donation.Retirement Planning Facebook Page....
Great Retirement E-zine is issued quarterly and
includes links to new articles on retirement planning at this website and other
links of interest. If you wish to receive it, please fill out the form below
and submit it.