Charitable giving is a powerful way to make a difference in your community, support causes you care about, and leave a lasting legacy. Many Canadians choose to make charitable gifts in their Wills, which can provide significant tax benefits for their estate.
If you’re considering making a charitable gift in your Will, here’s what you need to know about the tax benefits in Canada:
Tax credit for charitable gifts in your Will
When you make a charitable gift in your Will, your estate may be eligible for a tax credit based on the fair market value of your gift. The tax credit is applied against the tax owing by your estate, which can reduce or eliminate the tax burden on your estate. This means that your charitable gift can make a bigger impact on the causes you care about.
Eligible charities
To receive the tax credit, your charitable gift must be made to a registered charity in Canada. You can search for registered charities on the Canada Revenue Agency’s website. It’s important to ensure that the charity you choose is eligible to receive your gift and that your gift is structured in a way that maximizes the tax benefits for your estate.
Legal requirements for a valid Will
To ensure that your charitable gift is carried out according to your wishes, it’s important to have a valid Will in place. A valid Will must meet the legal requirements in your province or territory, including the requirements for witnesses and signatures. It’s a good idea to consult with a lawyer or estate planner to ensure that your Will is drafted correctly.
Structuring your charitable gift
When structuring your charitable gift, you can specify the charitable organization and the amount of your gift in your Will. You can also choose to give a residual gift, which is a percentage of your estate after other gifts and expenses have been paid. This can be a tax-efficient way to make a larger charitable gift while still providing for your loved ones.
Carrying forward excess tax credits
If the tax credit for your charitable gift is greater than the tax owing by your estate, the excess credit can be carried back to the previous tax year or forward for up to five years. This can provide additional tax savings for your estate and help to maximize the impact of your charitable gift.
In conclusion, making a charitable gift in your Will can provide significant tax benefits for your estate while supporting causes you care about. By working with a lawyer or estate planner and choosing a registered charity, you can ensure that your gift is structured in a way that maximizes the tax benefits and creates a lasting legacy of generosity.
For a great article that highlights some calculations and potential savings, please read, https://www.willpower.ca/tax-benefits-of-charitable-gifts-in-wills/