In our lifetimes, many of us find solace and purpose in supporting causes and charitable organisations that resonate with our values. Traditional donations, whether monetary or in-kind, often address immediate needs, providing a swift response to pressing issues. However, there exists another form of giving, one that looks beyond the immediacy and seeks to make a lasting impact — legacy giving. While regular donations answer the call of "how can I assist today?", legacy gifts respond to a more profound query: "how can I ensure assistance for tomorrow?" and "how would I like my contributions to be remembered?".
Recent studies, including one conducted by Willfinity, highlight an intriguing trend. The survey revealed that a mere 12% of Canadians have made plans to leave a legacy gift. Surprisingly, one-third of the population is either unaware of this option or remains undecided about it. This data underscores the significant opportunity and, indeed, the responsibility, for legal professionals and charitable organisations to illuminate the potential and power of legacy gifts for Canadians.
The Essence of a Legacy Gift
At its core, a legacy gift represents a donation made to a charitable or non-profit organisation, stipulated in one's will or estate plan. Unlike spontaneous donations, these gifts are meticulously planned and often reflect a donor's long-term vision for a cause or charity. A legacy gift can encompass various forms, such as real estate, cash, securities, or a specified percentage of one's estate. These gifts hold immense potential. They serve as pillars of support for charitable organizations, ensuring sustained operations and the ability to undertake substantial projects.
Yet, despite their significance, there exists a considerable knowledge gap surrounding legacy gifts. Many Canadians remain unaware of their existence, the mechanisms through which they function, and the potential tax benefits they can offer. To bridge this gap, numerous resources, including educational videos from esteemed professionals like Paul Nazareth, Vice President of Education and Development for the Canadian Association of Gift Planners, have been made available. It is crucial for Canadians to tap into these resources and gain a holistic understanding of legacy giving.
The Intersection of Legal and Charitable Intentions: Crafting the Ideal Will
Drafting a will is not merely a legal exercise; it's an intimate reflection of one's life, values, and aspirations. It's a document that captures one's legacy, ensuring that their wishes, especially regarding charitable donations, are honoured meticulously. By carefully selecting the right will, individuals can ensure that their intentions are crystal clear and that their legacy resonates in the manner they envisioned.
When it comes to legacy gifts, it's essential to understand the nuances that differentiate them from other forms of giving. Often, the terms "legacy giving" and "planned giving" are used interchangeably. However, there's a subtle distinction worth noting.
Delineating Legacy Gifts and Planned Gifts
In the realm of charitable giving, the terminology can sometimes overlap, leading to confusion among potential donors. While the terms "legacy gift" and "planned gift" often find themselves used synonymously, it's essential to distinguish between them to ensure clarity in intent and execution.
At its essence, a planned gift is any charitable donation that an individual commits to make after their passing. The "planned" aspect of the gift signifies that it has been prearranged and documented, typically in a will or an estate plan. Such gifts can include cash, securities, real estate, or even a defined percentage of one's estate. As long as the donation has been previously arranged and documented, it qualifies as a planned gift.
While all legacy gifts can be classified as planned gifts, not all planned gifts necessarily qualify as legacy gifts. A legacy gift, as the name suggests, is specifically intended to leave a legacy or lasting impact. These are often larger, more substantial gifts that aim to support a charitable cause or organisation in the long run, ensuring sustainability and growth. They are often tied to the donor's personal story or journey, making them deeply personal and reflective of the donor's values and aspirations.
Understanding the nuanced differences between these two forms of giving is crucial. It ensures that when one drafts their will or estate plan, they are entirely clear on the kind of impact they wish their donation to have. Moreover, from a legal perspective, this clarity can prevent potential disputes or misunderstandings down the line.
The Power and Potential of Legacy Gifts
Legacy gifts are transformative, both for the donor and the receiving organisation. For donors, the act of legacy giving allows them to immortalise their values, ensuring that their support for a cause or organisation continues well beyond their lifetime. It is a testament to their commitment and belief in the mission of the charitable entity they support.
From the perspective of charitable organisations, legacy gifts can be game-changers. Such substantial donations can help fund significant projects, establish endowments, or even aid in the creation of new facilities or programs. They provide financial stability and open doors to possibilities that might otherwise remain out of reach.
Yet, the power of legacy gifts isn't just in their monetary value. They serve as a beacon of hope and a testament to the long-term vision of donors. When other potential donors witness the impact of legacy gifts, they too might be inspired to contribute in a similar manner, creating a ripple effect of generosity and vision.
Legal Considerations and Tax Implications
In Canada, as with many legal matters, there are specific considerations to bear in mind when planning for legacy gifts. From ensuring that the will is valid and enforceable to understanding the tax implications of such gifts, the legal landscape surrounding legacy giving can be intricate.
One of the most notable benefits of legacy gifts, from a financial standpoint, is the potential tax benefits they can confer. By structuring their gifts wisely, donors can significantly reduce the tax burden on their estate, ensuring that a larger portion of their assets reaches their intended beneficiaries, be it family members or charitable organisations.
Navigating the Legal Landscape: Drafting a Compliant Will
In Canada, the importance of a legally compliant will cannot be understated. It serves as the cornerstone for any legacy gift. Without a valid will, the intentions of the donor might be rendered moot, and the assets could be distributed as per intestacy laws, potentially bypassing the intended charitable beneficiaries.
When drafting a will that includes legacy gifts:
- Specificity is Key: It's essential to be precise about the gift's details. Whether it's a specific sum of money, a piece of property, or a percentage of the estate, clarity prevents future disputes.
- Name the Organization Correctly: Minor discrepancies in the name of a charitable organisation can lead to confusion. Ensure that the full, official name of the charity is mentioned in the will.
- Assign an Executor with Knowledge of Your Intentions: The executor plays a pivotal role in ensuring that the will's provisions are carried out faithfully. It's advisable to choose someone familiar with the donor's charitable intentions and, if possible, with some knowledge of legacy giving.
Embracing the Tax Advantages: A Win-Win Scenario
Canada's tax system acknowledges the altruism behind legacy gifts and offers tangible benefits for such acts of generosity. Upon making a legacy gift:
- Tax Credits: The estate can claim a tax credit for the value of the legacy gift. This can significantly reduce the estate's tax liability, ensuring that more of the donor's assets are utilised as they intended.
- Carry Forward Benefits: In cases where the tax credit from the legacy gift exceeds the estate's tax liability for the year, the excess can be carried back to the last two tax years of the deceased, leading to potential tax refunds.
- Capital Gains and Legacy Gifts: If the legacy gift comprises assets that have appreciated in value, such as real estate or stocks, there are potential capital gains tax implications. However, gifts of publicly traded securities to registered charities can be exempt from capital gains tax.
Legacy Gifts: A Reflection of Values and Vision
For many, the decision to leave a legacy gift is deeply personal. It's a reflection of their journey, values, and aspirations for the future. By opting for legacy giving, individuals have the unique opportunity to create lasting change, impacting lives for generations to come. Whether it's funding research, supporting the arts, aiding in education, or any other noble cause, legacy gifts ensure that the donor's vision is realised, even in their absence.
Moreover, legacy gifts serve as an inspiration. When others witness the transformative power of such gifts, they too might be motivated to contribute, leading to a cumulative impact that far exceeds the sum of individual contributions.
Encouraging a Culture of Legacy Giving in Canada
Canada, known for its diverse culture and compassionate citizens, has a rich history of philanthropy. Legacy giving, although not as widespread as one might hope, has the potential to redefine the philanthropic landscape in the country. As more Canadians become aware of the profound impact of legacy gifts, the hope is that a culture of forward-thinking generosity takes root.
One of the most effective ways to promote legacy giving is through education. By offering seminars, workshops, and informative resources, charitable organisations and legal professionals can demystify the concept. By breaking down the legal, financial, and emotional aspects of legacy gifts, potential donors can make informed decisions.
Celebrating Legacy Donors
Recognizing and celebrating those who choose to leave legacy gifts can serve as a powerful motivator for others. By sharing stories of donors, their motivations, and the tangible impact of their gifts, charitable organisations can inspire others to follow suit.
Charitable organisations, legal professionals, and financial advisors can collaborate to offer comprehensive guidance on legacy giving. Such a holistic approach ensures that potential donors receive the support and information they need from all angles.
Leaving a Mark: The Lasting Impact of Legacy Gifts
While all forms of charitable giving are commendable, legacy gifts have a unique resonance. They represent a bridge between generations, a testament to a donor's vision, and a beacon of hope for the future. As individuals contemplate the kind of mark they wish to leave on the world, legacy gifts offer an avenue to make a lasting difference.
In conclusion, legacy gifts, with their profound impact and transformative potential, are more than just financial donations. They are, in many ways, a reflection of the heart and soul of the donor. As Canadians, embracing and promoting this form of giving can pave the way for a brighter, more compassionate future, ensuring that the spirit of generosity lives on for generations to come.