by Lyle P. Konner, CLU, RHU, EPC
Konner & Associates
Why do people give? Because we’re asked. It’s our responsibility. We’re grateful. We owe it. Because it feels good. So, we know why. And we know what. Much has been written about what types of assets to give – cash, stocks, RRIFs, life insurance, real estate, trusts, annuities, artwork, jewellery, collections.
But perhaps we don’t know how – it seems complicated. Or we don’t think we’re financially able – too many of us think gifting is only for the rich.
Let’s deal with financial ability first.
We budget, we plan for retirement, we may work with a financial planner to ensure that we will not outlast our funds. Once we have identified our personal financial needs, we then determine how much to leave to our family. There is a growing awareness that we have more than we or our families need. This extra is known as social capital, the amount that you can return to your community. Some of us are fortunate to identify these funds during our lifetimes. For others, this discretionary capital only becomes available in their estate.
A recent Ipsos-Reid survey indicates that 8% of British Columbian’s give approximately $8,000 to charity in their wills.
If this is an amount you think you could afford, it’s easy to do. Let me show you how? Gifting falls into two general categories: gifting during lifetime, and gifting at death.
Gifting during lifetime
During lifetime, we make annual contributions to door-to-door canvassers, our church, the United Way. We may also make an occasional larger gift to a specific charity, such as Semiahmoo House Society, to assist with a capital campaign to raise funds for a building or equipment for example.
Gifting at death.
The other category is estate gifting, sometimes known as deferred or planned giving. An estate gift must be in writing, either in your will or directly designated in the RRSP/RRIF contract, or insurance policy. Both the amount and the charity must be identifiable.
Identify the amount. Some choose a dollar amount, others a percentage of their estate. Because the value of our assets is constantly changing, a percentage is perhaps safer in that it won’t get out of balance with the amount going to heirs.
Identify the charity. Consider the charity as another child and create one extra share to be distributed on your death. Or simply designate 10% of the residue of your estate to charity. How does that work? Let’s say you have four children. Would each of them miss 2½ % of their inheritance? Likely not, especially knowing that over 40% of the gift could have been lost to taxes anyway.
Endow your annual gifts. If you already give $10,000 annually to your church, your estate plan should consider leaving $250,000 to the church when you die so that your annual legacy can continue year after year. The church could invest this bequest at 4% to generate $10,000 every year thereafter. If you don’t have the cash in your estate, buy it Use life insurance to fund your estate gift. That way, the only cost to you is the annual premium. Better yet, use the tax credit from your annual giving to pay the premiums on life insurance to create the estate gift.
Reduce your estate taxes.
An estate gift is also an effective way to eliminate taxes on your estate. By planning the size, type and timing of the gift, your estate will be able to apply the charitable tax credit to tax due on your terminal tax return and the year prior.
Have you been touched by a kindness? Good fortune? Good health? Did you receive a scholarship? Would your life have been different if you had? Have you been helped by a stranger?
People give because they can. If you want to be one of those people, go ahead! You are. Extend a kindness. It feels great.