What is Legacy Planning and Why Do You Need It?

Legacy planning is an essential aspect of philanthropy that ensures your charitable wishes are fulfilled even after you have passed away. While the concept of succession planning may seem like a hassle, having a legacy plan will help you preserve your charitable commitments and allow your successors to continue supporting the causes you care about.

A customized succession plan usually involves leaving instructions on how you wish to distribute your assets. In the case of Impact Account holders, your legacy planning with Charitable Impact determines where you want the funds in your account to go. This can include a list of charities you want to contribute to, a successor or successors to take over your account, or planned contributions to specific programs or projects. 

Here’s a breakdown of what legacy planning includes and why it should be customized to your charitable goals:

What is Legacy Planning?

Similar to a last will and testament, legacy planning involves creating a detailed plan for how your charitable giving should be handled after your death. This can include naming successors to manage your Impact Account or specifying particular charities to receive your donations. Essentially, it’s a way to ensure your charitable wishes are respected and fulfilled, providing a lasting impact long after you’re gone. 

Who can be your successors?

In legacy planning, successors are individuals or entities that are designated to carry on your charitable giving wishes after your death. They can be family members, spouses, friends, trusted advisors, or the executor of your will. You can instruct most donor-advised funds (DAFs) to administer your charitable wishes or allow your successor to take over and use their discretion to carry out charitable giving. 

Why you should have a legacy plan

Here are a few reasons why you should have a legacy plan:

• Ensuring continuity: Succession planning ensures your charitable giving will continue to support the causes you care about and that your philanthropic goals are carried out properly. 
• Clear instructions: You’re establishing clear instructions on how your funds should be used, reducing any guesswork for your successors.
• Customized planning: Legacy planning allows for a highly customized approach, tailored to your specific charitable goals.
• Administrative relief: By handling all the details upfront, you reduce the administrative burden on your family and successors during a difficult time, providing a smooth transition of your charitable plans.

What you should Include in your legacy plan

When creating a legacy plan, there are several key considerations you should keep in mind:

• Succession planning: Name one or more successors to manage your Impact Account after your passing and provide instructions on how to allocate your funds. 
• Outline your wishes: Document your wishes and charitable goals. Define your philanthropic vision and those who will carry it forward. 
• Designate charities and causes: Include the names of the charities and causes you want to contribute to and how your funds or assets will be distributed among them.
• Immediate or deferred giving: Decide whether you want your successors to distribute the funds immediately to the charities and causes of your choice or over a set period. 
• Involving loved ones: Engage and include your family members in your giving strategy. This will ensure they understand your goals and feel invested in continuing your legacy.  

Creating a giving legacy through a donor-advised fund (DAF)

There are numerous ways to leave a legacy gift, such as through a donor-advised fund (DAF) with Charitable Impact. A DAF lets you earmark charitable assets upfront and decide later which specific charities you want to give to. This way, you don’t have to change your will every time your interests shift or if a charity you support no longer exists.

The advantages of a donor-advised fund

Here are some of the key benefits of having a DAF in your legacy planning:

• Immediate tax benefits: You can add funds to your Impact Account and receive an immediate tax receipt, even if you haven’t decided which charities to support yet.
• Flexibility: Your donation remains in your account until you’re ready to allocate it. This gives you time to consider the kind of impact you want to create.
• Strategic giving: A DAF allows you to develop a long-term giving strategy that aligns with your philanthropic goals and financial and estate planning objectives. By having a giving strategy, you’re ensuring your donations will have a sustained and meaningful impact after you’re gone.
• Anonymous giving: If you prefer, you can make donations anonymously through your DAF. You can maintain privacy and confidentiality while supporting the causes you care about without public recognition. 
• Philanthropic legacy: A DAF can be a part of your estate planning. You can designate your DAF to receive a portion of your estate and which of your favourite charities will benefit from it. In doing so, you’re guaranteeing long-term support for these causes and charities.  

Including legacy gifts into your will

When it comes to including legacy gifts in your will, there are three main options:

• Specific bequest: Donate a specific amount of money or property of your will.
• Residual bequest: Leaving a portion of your estate to charity after providing for your heirs.
• Contingent bequest: Donating an asset if the primary beneficiary does not survive you.

Types of legacy gifts

Legacy gifts can take various forms. They can include giving non-cash assets or naming a charity as the beneficiary of a life insurance policy or registered investment account. Here are some examples of the types of legacy gifts you can give:

• Real estate: You can donate real estate to charity by including it in your will. Doing so can provide significant tax benefits, such as tax credits. 
• Securities: You can donate appreciated securities directly to charities, rather than selling them and donating the proceeds, to avoid capital gains taxes and maximize the value of your charitable contributions.
• Investments in non-registered accounts: You can donate investments in non-registered investment accounts to charity through your will.
• Life insurance and registered investment accounts: You can name a charity as a beneficiary of your life insurance policy or registered investment accounts, such as an RRSP, or transfer their ownership to the organization as a form of legacy gift. 

Leaving a lasting legacy through planned giving

There are many decisions involved in legacy planning, and it’s easy to procrastinate. However, using a DAF with Charitable Impact can simplify the process. By creating a legacy with Charitable Impact, you can ensure appropriate tax savings and develop a long-term strategy to decide which causes and charities to support. You can also involve family members in decisions around your Impact Account, helping them feel more invested in carrying forward your legacy in the future. Check out our online resources to learn more about donor-advised funds today and how you can leave a lasting, meaningful impact through charitable giving.