Making the most of bequests under a Will

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Many Canadians approach their financial planning with the long view in mind. However, trying to predict personal cashflow needs and the needs of future generations can be difficult, but it shouldn’t stop a donor from supporting a cause they believe in.

For this reason, many donors feel more comfortable leaving a charitable gift or bequest under their Will. In fact, a bequest is one of the easiest ways to create a legacy of charitable giving and provides donors with time to assess their personal needs and future potential demands on their estate.

Who should consider this bequest option?

A charitable bequest under a Will is ideal for a donor who wishes to gift a specific amount of capital, a specific percentage of the proceeds of their estate or a specific asset. A charitable bequest under a will is also advisable when a donor wishes to gift a portion of the proceeds of a life insurance policy to their preferred charity through their estate. These gift options will be entitled to a donation receipt that can be used to offset the final or next to final tax bill of the deceased, or in the estate’s tax return. In short, this giving option is well suited for those wishing to leave a gift to charity in their will but may need to made adjustments to the arrangement over the course of their lifetime.

What are the different types of bequest?

A specific bequest – is a gift of a particular asset or stated sum of money. For example, a donor may provide that $25,000 be given to their local charity after they die.

A residual bequest – is a gift of all or a fraction of what remains after all debts, expenses and specific bequests have been paid. For example, if a donor specifically provides that all remaining property is distributed between a family member and their preferred charity.

A contingent bequest – takes effect only if the primary intention of the Will can not be met. For example, if a donor’s primary beneficiary, like a spouse, does not survive them a contingent bequest would allow the donor to indicate a next choice such as a preferred charity.

Making the most of a bequest

Charitable bequests offer flexibility for donors. Since a bequest is a future intention, the donor retains the ability to change or add beneficiaries and modify gifted amounts and type of gifts at any point during their life. These kinds of changes will likely require changes to the donor’s Will and that likely means involving a lawyer. This can be costly and time consuming.

Another option is making a single gift under their Will to a charitable organization like Gift Funds Canada in the form of a Donor Advised Funds (DAF). In this case, the donor leaves grant recommendations for specific charitable recipients and instructions for ongoing management of the Fund’s assets. Now a donor can change any aspect of their gifting strategy by simply notifying Gift Funds Canada, saving the time and cost associated with changing a Will.

A charitable bequest under a Will is certainly an easy way to establish a legacy of giving. Combined with a DAF, donors gain the time to consider their own cashflow needs while retraining the flexibility to make changes to their Will if circumstances change.