Everyone needs a will. If you want to act on your generosity, it can be especially important.
If you’re reading this, I’ll assume you’re a charitable person, passionate about creating positive change in the world. Canadians are generally giving folk. According to a 2015 survey, around 82% of Canadians donate to charities throughout their lifetime. This is something we can all be proud of.
Unfortunately, many of us are falling short when it comes to making the most significant impact. A vast majority of Canadians miss out on the opportunity to make a charitable contribution in their will.
Also known as legacy giving or planned giving, only 5% of Canadians include a charity in their will, which means missing out on two crucial things:
– Having a significant impact on the causes you care about
– Tax savings that come with legacy giving
So, what’s the deal with this 77% discrepancy?
Why Canadians don’t include charities in their will
The biggest barrier is the misconception that leaving a gift to charity will take away from the legacy you leave behind for your loved ones. As Paul Nazareth of CAGP explains, “The most common thing holding people back from gift planning is that people want to support their loved ones and are afraid a charitable bequest will take away from what their family members get. But this simply is not true. In fact, Canada has the best bequest incentives in the world!”
Another huge barrier to legacy giving is simply analysis paralysis. There is an abundance of registered charities to choose from. With over 86K organizations across the country working towards things like advancements in education or aiming to reduce poverty, it can be hard to narrow down your list to just a few.
The volume of choice can be overwhelming for people, especially knowing that their passions and desires may change as life goes on. The result is that people avoid the option entirely and don’t include a charity in their will at all.
The benefits of including one or more charities in your will
Have a significant impact on the causes you care about.
There are many benefits to include one or more charities in your will. The most obvious advantage to leaving a gift to charity in your will is you can continue making a difference in the world in death as you did in life. If you are giving while you are alive, it is an opportunity for your philanthropy to carry forward after you die. Or, if you didn’t get a chance to give very much during your lifetime, adding a charity to your will is an opportunity to possibly give much more.
Most people don’t realize just how big of a difference they can make by leaving to a charity in their will. Up to 5% of most estates account for more than all the charitable donations someone is able to make in their entire lifetime. Let’s take an average estate of $845,000, for example. Leaving a gift of $42,000 amounts to less than 5% of the entire estate. Imagine the impact this can have on the causes that are near and dear to your heart.
Decrease tax bill upon death.
Under Canada’s tax system, a person’s death often gives rise to lots of income tax. As Epilogue’s Co-Founder, Arin Klug, likes to say, “your last tax bill is often the biggest tax bill you’ll never see.”
This is where one of the other big benefits of planned giving comes in. When someone chooses to leave gifts to charity in their will, it can reduce—or even sometimes eliminate—the tax bill that arises upon death.
The Canadian government offers some of the best tax incentives in the world to encourage charitable giving, especially from your estate.
Leave a larger legacy to your loved ones.
As mentioned, one of the most common reservations people have when it comes to planned giving is that they don’t want to take away their loved ones. However, since charitable giving can reduce taxes, it’s possible for someone to give to charity without impacting the amount available to their beneficiaries. When it comes to your estate, you can give to both family and charity. It doesn’t have to be an “either-or” decision.
According to Estate Advisor, Rick Goldring: “The most common reservation people have about planned giving is that leaving money to charity will impact the legacy that their family receives. Most people are unaware of the income tax impact upon death and the very generous tax rules we have in Canada relating to donating to charity. If you have a choice between three possible beneficiaries and you can only pick two of family, government, or charity, which two do you choose? With proper advanced planning, tax can be reduced dramatically (or eliminated) with the legacy being left for family and charity being maximized.”
How to choose a charity to name in your will
Deciding to include a charity in your will is the easy part. The harder part is deciding which one(s) to include.
Here are 6 questions to ask yourself when deciding which charity (or charities) to include in your will:
- Which charities align with my values?
- Which charities have helped me personally thrive?
- What goes do I hope to achieve in my lifetime and how does planned giving help me achieve those goals?
- What does my community need the most help with right now?
- What matters most to the people that matter most to me?
- Should I consider a donor-advised fund (DAF), like Charitable Impact?
The key is to set aside some time to think deeply about the change you wish to see in the world and contemplate how charitable giving and bequests in your will can help you achieve this. Doing so doesn’t have to take too much time or cost a lot of money. With online will services, like Epilogue, you can write a will in as little as 20 minutes and include the charities that matter most to you.
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This is a guest blog post from our friends at Epilogue Wills, which offers smart, affordable online wills for Canadians.
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