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What are the advantages of a charitable bequest?

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Audrey

By Audrey on November 9, 2009

Your charitable bequest will reduce the taxes to pay upon death. The charitable bequest entitles you to non-refundable tax credits that are equivalent to nearly 50% of the value of the donation. The liquidator can use the receipt obtained for the donation for up to 100 % of the net income of the year of death and of the previous year if there is a surplus. 

A notarial will is advantageous because it avoids going through a probate process which is mandatory in the case of a holograph will or a will made in the presence of witnesses.

  • The costs related to a notarial will can be less than those generated by the two other types of testaments.
  • When including a donation in your will, make sure that you name the beneficiary precisely.
  • If you intend on making a donation to a national organization which is present locally, make sure that you specify whether the donation is intended for the national organization or one of its local branches.

Example:

A cottage which was bought for $50,000 is worth $100,000 at the time of death.  Half of the capital gain, that is to say $25,000, will be included in last year’s income, even though it has not actually been sold. This is called ‘deemed’ capital gain. Since the charitable bequest entitles you to a receipt admissible up to 100% of the net income of the deceased, the donation becomes a solution to consider because the tax credits granted ($48,180) will reduce the taxes to pay ($12,050 if we assume the tax rate is 48.2%) following the presumed transfer.

Many different types of charitable bequests exist; the most common are the specific bequest and the residual bequest. The charitable remainder trust is less common but allows the loved ones of the deceased to benefit from the income generated by the trust; upon death of the beneficiary or beneficiaries all assets are transferred to the organization.

It is the role of advisors in financial services and planned giving professionals to guide the donor.

How to plan a donation?

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