Bequests

A Will used to be referred to as a “Testament”. It is not just a document divesting assets but a moral biography of the values of the individual. When one adds up all the accumulated assets and possessions of a lifetime, the impact on the lives of loved ones and their community can be powerful. Making a Will ensures an individual distributes their possessions as they see fit, rather than as the government determines.

They also have the power to ease the transition of their passing for those who survive them. When a donor includes the local community foundation in a will, they are making a powerful public statement of values and leaving a legacy of support to help strengthen causes they care for and community programs for generations to come.

Gift Examples

  • Gifts funded with cash or cash equivalents
  • Publicly Listed Securities (including segregated and mutual fund units)
  • Proceeds from Retirement Plan Accumulations (RRSPs and/or RRIFs)
  • Gifts of Real Estate
  • Gifts of other tangible property

Benefits to the Donor

  • Revocable during the donor’s lifetime by changing the will
  • Donation receipt for use in final income tax return against 100% of taxable income
  • Satisfaction of providing for a future gift while retaining full control of property

Most Appropriate for

  • All individuals (any age), but especially older persons with few or no heirs

Example

Mr. Valois leaves a bequest of listed stock* to a public charity. On the date of death the stock has a fair market value of $100,000 and a cost base of $10,000. The donor’s net income in the year of death is $250,000 not including the taxable capital gain on shares.

With gift $ Without gift $
Fair market value of stock 100,000 100,000
Capital gain 90,000 90,000
Total net income (before capital gain) 250,000 250,000
Taxable capital gain (50% of capital gain) 45,000
Total taxable income 250,000 295,000
Tax* 112,500 132,750
Tax credit on gift (45,000) 0
Tax payable 67,500 132,750
Charitable gift $100,000
Cost of gift ($100,000 – tax savings of $65,250) 34,750

* In order to take advantage of preferential tax treatment of public securities the donor’s will must either list specific shares or direct the executor to use appreciated securities to fund the intended charitable gifts. The second option is preferable so that there is flexibility for the executor and in the case of investment portfolio changes there is no need to change the will.

For illustration purposes a combined tax rate of 45% was used. Please note that combined tax rates vary across the provinces. 2015 tax table.

Note to reader: The purpose of this publication is to provide general information, not to render legal advice. In addition any changes in the tax structure may affect the examples listed in this information. Your client should consult their own lawyer or other professional advisor about the applicability of this information to their situation.

Additional Resources

Gifts of Bequest by Will – Client info sheet
(add your own label or stamp to customize it for your clients)

Gifts of Bequests – Q&A [PDF]

Donor Story

Irene Hoover and her husband owned a bakery and enjoyed a great deal of success and prominence in their hometown. After her husband passed away two years ago, Irene decided it was time for her to update her will.

Part of her plan was to give something back to the community the Hoovers had loved as both residents and business owners.

“Not only did Jim and I love our town, but we felt as though we owed it a lot for the success of our business,” says Irene.

With the help of her professional advisor, Irene revised her will to include an inheritance for the Hoovers’ university-age niece, with the remainder creating the Hoover Bakery Fund, a Field of Interest Fund designed to support community development efforts. Because it will be endowed, her gift will provide a growing source of community funding for festivals, neighborhood revitalization, publicly accessible artwork, and other community improvements.

“I like knowing that when I’m gone, our legacy will be one of helping others strengthen our community,” says Irene.