Planning your legacy with Charitable Impact

Leave a Legacy Month is coming to an end—did you make the most of it?

For some, it’s an important reminder to re-evaluate your legacy plan. But for most, it’s an even more important reminder to create one.

What is legacy planning?

Most of us are familiar with the concept of a last will and testament: the legal document that outlines your wishes surrounding your death. This might include end-of-life plans and naming care-takers for your children. Most often, the term is associated with documenting instructions for the distribution of your estate. 

Your estate consists of the assets (like property, investments, and cash) and liabilities (any debts, like a mortgage on your home) under your ownership, at the time of your death. While planning your estate is very important, it may not feel particularly exciting. There are legal and financial considerations to be made, documents to be filed, and you won’t be around to enjoy any rewards for your efforts. But that last point is key: it is essential to document your wishes while you’re able to. 

It can be daunting to plan your legacy. As a Philanthropic Advisor, I receive questions from clients about formulating their charitable legacy. While there is no one-size-fits-all answer, below I explore some of the considerations around developing your legacy plan.

How do you want to be remembered after your death?

Yes, legacy planning includes the nitty gritty pieces like drawing up your will, naming your executor, and reviewing your beneficiary designations. It’s about succession planning for your businesses or providing for your partner, children, or other dependants. 

It’s also about supporting the charitable causes that matter most to you—often in a cost-effective way through tax savings for your estate. 

Still, research shows that charity is not often top of mind when setting out to create a will. Nearly 90% of Canadians will have a will by age 75. According to a survey from the Canadian Association of Gift Planners (CAGP), only about one third of Canadians are interested in leaving to charity in their will. That could be because many may simply not have considered it. 

Among those who said they would not (23%) or are not very likely (40%) to leave a gift to charity in their will, are also those who say they have not done much thinking about it. 

If that’s you, I want to help you find the space to thoughtfully consider your giving legacy. 

What’s often overlooked is that writing your will is an opportunity to designate a charitable gift as an expression of the values that guide and shape your life. By working with your own professional advisors, you can create a legacy that suits you and your family, and empowers future generations.

If philanthropy plays a significant role in your life, why shouldn’t it be recognized at the time of your death? If you’ve spent your life committed to supporting your community, to improving a particular circumstance, or to combating injustice, it’s fitting to incorporate these principles into your will. Conversely, you may not be giving during your lifetime but see the specific benefits of doing so in testament. 

Preparing to leave a legacy

One of the most common concerns about leaving a legacy gift to charity is how the gift will be received by any surviving heir(s). Common fears are that there won’t be enough to leave to loved ones: 67% of people in the 2019 CAGP survey cited this as their main concern. 

Other questions might also arise: Will your loved ones understand the intention of your gift? Will they feel hurt or left out? Will they challenge the will altogether?

The reality is that making a legacy gift doesn’t mean leaving all of your wealth to a single charity. And, you don’t have to choose between your children or charitable giving. A thoughtful legacy plan can include any number of stakeholders, and can engage those stakeholders in conversations early in the process. 

That is the key: Having conversations with your loved ones about the causes you care about helps them understand and feel invested in your legacy.

Creating a giving legacy through a donor-advised fund (DAF), like Charitable Impact, allows you to pass along the opportunity to give to your loved ones—giving them the chance to decide what causes they can support. There are so many ways to leave a legacy. Doing so with Charitable Impact opens up even greater flexibility. 

Leaving a legacy gift can take many forms

[Editor’s note: We hope you find this material useful in learning about giving. However, you should never use this material without first reviewing it with your own lawyer(s) and tax advisor(s) to determine its suitability for your circumstances. This material is not legal, tax, or other professional advice.]

It goes without saying that death is a significant event. What might not be as evident is that death can carry with it hefty financial implications, such as the capital gain taxes on appreciated assets. This is because of the “deemed disposition”—the Canada Revenue Agency’s (CRA) determination that a person disposes of all capital property immediately prior to their death. 

Good news: there are a number of ways to make tax-effective legacy gifts that support the charitable causes most important to you. What works for some, doesn’t work for others, and what might work for you should always be considered with the advice of your lawyer.

One approach might be to donate a specific amount of money or piece of property in your will. Keep in mind that donating appreciated assets subject to capital gains tax is the most tax-effective way to give in life and death.

While your primary residence will appreciate during your life, it will be exempt from capital gains tax upon your death. In contrast, your appreciated invested assets will generate high taxes owed upon your death and might make for a wise charitable donation. 

Another approach might be to donate a residual bequest, only after you have passed along portions of your estate to your heirs. Or, a contingent bequest, where you can donate the asset if the primary intention cannot be carried out. For example, if anyone you originally designated to receive a portion of your estate does not survive you. 

It could also be most cost-effective to designate portions of your estate to charity and give the payable proceeds from a life insurance policy to your heir(s) by beneficiary designation (which is not governed by your will).

The options to build your legacy are seemingly endless. However you choose to do it, there are tax benefits to donating assets upon your death and charitable donations are a great way to reduce the amount of taxes owed by your estate. An important first step in planning giving for your estate is always to seek the advice of a professional advisor. 

Charitable Impact can support your legacy plan

There are lots of decisions involved in planning your legacy, and ensuing temptation to procrastinate. Research shows that Canadians typically need a major life event (like a marriage, divorce, birth in the family) to happen in order to change their existing wills.

While I work with clients to formalize their legacy plans, it wasn’t until my daughter was born that my partner and I sat down to create our wills. Still, I don’t see us jumping at the opportunity to make changes anytime soon. 

That’s where a DAF like Charitable Impact can make a world of difference. Making legacy gifts via Charitable Impact means earmarking charitable assets now, without immediately having to designate charities for eventually allocating those funds.

You can also involve family members in decisions around your Impact Account today, so they may feel more invested in carrying forward your legacy in the future. 

By creating a legacy with Charitable Impact, there is no need to make changes to your will each time a new cause piques your interest or if a charity you support ceases to exist in the future. 

Like in life, leaving a bequest to your Impact Account or naming your Impact Account in a beneficiary designation ensures the appropriate tax savings (through an immediate tax receipt at the time of donation). By doing so, you are also given the opportunity to take the necessary time and space for evaluating causes and charities to support. 

Another hugely valuable aspect of creating a giving legacy with Charitable Impact is that you can access help along the way. There’s a team of people here to provide support: to you, as you build your legacy plan, and to your loved ones, as we carry out your charitable final wishes.

It’s all about being able to contribute to your vision of a brighter future, and including those you love in the process.

At Charitable Impact, we’re here to help you achieve your giving, your way, with our support. Our Philanthropic Advisory services provide clients with custom solutions to achieving their charitable ambitions. Reach out to Nicole Macdonald, Manager of Philanthropic Advisory, with questions about how Charitable Impact can support your giving today and your giving legacy tomorrow. 

As mentioned above, we hope you find this material useful in learning about giving. However, you should never use this material without first reviewing it with your own lawyer(s) and tax advisor(s) to determine its suitability for your circumstances. This material is not legal, tax, or other professional advice.