Everyone has a cause that they want to support, whether it is with money, time or energy. That’s why most people throughout their lives decide to donate to several charities or organizations to help out today. But, have you ever wonder how can you contribute to the future? In this regard, there is a way for Canadians to make a lasting impact in their community, which is known as, legacy giving.
The first thing that you need to understand, is that legacy giving is something that kicks in once you pass away. You have the option to choose a single cause or various organizations. Everything is up to you. Keep in mind that legacy giving in Canada is not your only option. You could also opt for charitable planned giving. In case you want to learn more about this, go to WEALTHinsurance.com.
Since there are many Canadians who don’t know anything about this charitable option, in this article, we will break it down. Below, you will learn what is legacy giving, how it works and its benefits.
A guide to legacy giving in Canada
What is legacy giving?
As we stated above, legacy giving is something that starts playing a role once you die. The easiest way to understand it is to think of it as a future donation. You can leave a legacy gift to a charity or a non-profit organization. This gift could be a fund, a percentage of your estate or even a property.
These legacy gifts are essential for all causes since they can allow charitable organizations to reach more people and plan future projects. Plus, legacy giving in Canada brings several benefits, such as tax incentives.
Before we get into all the advantages of legacy giving, we are going to explain how to leave one.
How can I leave a legacy gift?
It might come as a surprise, but there are several ways in which you can leave a legacy gift. To make it easy for you, we will divide it into sections.
- Outline it in your will
Writing in your will how you wish to distribute your assets is the best way to make sure everything goes to the right place. As part of your estate plan, you can include a legacy gift. To do this, first, you will have to choose a specific organization. Then, you need to decide what you will give them, such as a piece of art or a determined amount of money. You can either stop there or take an extra step.
Another thing that you can do when it comes to legacy giving in your will is leaving the organization a percentage of your estate. The best part about this option is that over time your estate could potentially grow, increasing the amount of legacy giving.
Even though below, we will outline more options for legacy giving in Canada, overall, making it part of your will is the easiest path.
- Using your Life Insurance
You can also leave a legacy gift through your Life Insurance policy. When you purchase life insurance in Canada, you make sure that your beneficiaries receive a certain amount of tax-free money. But, additionally, you can leave a legacy gift throughout different channels.
- You can pick a charitable organization to be one of your beneficiaries. That means, at the time you pass away, they will receive a certain amount of money. The best part about this is that your estate will get a tax credit which can reduce the offset taxes in your last income return.
- Creating a new policy is another option that you might opt for. Keep in mind that for this policy, you need to name the charitable organization as the policyholder. Same as before, you will get a tax credit. But, in this case, you’ll have a yearly tax credit for every premium you pay.
- The last thing that you can do is transferring your policy. This means that the owner of the life insurance will now be a charitable organization. If you do this, you’ll get a tax credit for the amount of the policy and any previous premiums you paid.
- Registered Retirement Savings Plan (RRSP) or Registered Retirement Income Fund (RRIF)
If you are thinking of legacy giving in Canada, you might want to consider using your RRSP and RRIF. You can leave a part of your contributions to these accounts to a charitable or non-profit organization. Don’t worry, legacy giving through this method also qualifies for a tax credit on your final income tax return.
Benefits of Legacy Giving in Canada
The main reason why some people don’t leave a legacy gift is that they think this will take money away from their beneficiaries. However, that is not true. Instead, legacy giving can actually bring lots of benefits.
- Tax credit
One of the most important benefits of legacy giving is one that we mentioned before, tax credit. This is something that the Government of Canada created to encourage all Canadians to leave a legacy gift. When you pass away, you will get a tax credit in your final income return for the value of your legacy. That means you will increase the amount of estate that your beneficiaries will get.
- Legacy of generosity
A legacy gift is also a way to contribute towards how you want to be remembered. Plus, you will be supporting a cause that you care about. The best part is that usually, legacy gifts end up being more substantial than anything you could have donated in your lifetime.
- Encourage others
If you decide to leave a legacy gift, you can encourage others to do the same. Talk about it with your friends and families, and show them how they will be helping charitable organizations. Plus, if you want to give them an extra push, mention the tax credit they will get.
Overall, legacy giving in Canada is one of the best things you can do since you’ll be supporting an important cause. Also, don’t forget that in return you’ll be getting amazing benefits. If you are thinking about legacy giving in Canada, you can start looking for organizations you’ll want to assist.