Including charitable giving in your will is a powerful way to leave a lasting legacy, supporting the causes that matter most to you while potentially benefiting your estate and heirs. In Ontario, individuals who wish to make a charitable bequest must ensure that their wills are carefully drafted to reflect their intentions while complying with applicable estate laws. A well-structured charitable gift can create a meaningful impact for future generations while offering potential tax advantages for your estate.

Types of Charitable Gifts in a Will

There are several ways to structure your bequest when considering charitable giving in your will. The most common type is a specific bequest, where a donor designates a fixed amount of money or a particular asset to be left to a registered charity. Alternatively, a residual bequest allows a charity to receive either a percentage of or the whole of the remainder of an estate after all debts, taxes, and other distributions have been settled.

Another approach is a contingent bequest, which ensures the charity will receive the gift only if certain conditions are met, such as if named beneficiaries predecease the testator.

Ontario law recognizes and enforces these bequests, provided the will is properly drafted and executed. It is essential to clearly identify the chosen charity, including its official legal name and registration number, to avoid any ambiguity that might complicate the distribution of the estate.

Legal Considerations for Charitable Bequests

In Ontario, a charitable gift must be included in a legally valid will to be enforceable. Under the Succession Law Reform Act, a will must be in writing, signed by the testator, and witnessed by two individuals who are not beneficiaries. Failure to adhere to these formalities may result in the gift being invalid or the entire will being contested in court. It is advisable to consult an experienced estate planning lawyer to ensure compliance with legal requirements.

Another important legal consideration is ensuring that any dependents or those you have legal obligations to support are properly provided for first. Under Ontario law, dependents who have not been adequately provided for may have grounds to make a claim under dependent support provisions. If a significant portion of an estate is allocated to charity while dependents receive little or no support, the court may intervene to adjust the distribution.

If the charitable gift is not large enough to justify the creation of a foundation or fund, a fixed legacy gift is ideal instead of a residual bequest. This makes administering the estate much simpler for the executor who simply provides the amount stated in the will to the charity of choice. It also makes for clearer accounting for residual beneficiaries when the estate is being wrapped up.

Tax Benefits of Charitable Giving in Your Estate Plan

One advantage of charitable giving in a will is the potential tax relief for the estate. In Ontario, when an individual passes away, their estate may be subject to capital gains tax on certain assets. However, gifts made to registered charities are eligible for a charitable donation tax credit, which can significantly reduce the tax burden on the estate.

A charitable donation can be claimed for up to 100% of the deceased’s net income in the year of death and the preceding year. If structured properly, a significant charitable gift can help offset estate taxes, preserving more wealth for other beneficiaries while also benefiting a chosen cause. Estate trustees are responsible for ensuring all charitable gifts are correctly accounted for in the final tax return.

Choosing the Right Charity

Selecting a charity to include in your will requires careful consideration. Ontario residents should ensure the organization is a registered charity with the Canada Revenue Agency (CRA), as only registered charities qualify for the charitable tax credit. Conducting due diligence on a charity’s mission, financial health, and long-term sustainability can help ensure the gift has the intended impact.

It is essential for for testators to diligently research their charity of choice and ensure they list the correct legal or corporate name for the charity in their will. If the charity is not properly named, executors can run into significant difficulties when adminstering the estate.

Some individuals establish a donor-advised fund or a charitablefoundation as part of their estate plan. These options allow greater flexibility in managing charitable contributions over time, ensuring that donations are strategically allocated to various charitable causes in accordance with the testator’s wishes.

The Role of an Executor in Administering Charitable Gifts

The executor of an estate plays a crucial role in ensuring that charitable gifts are distributed as specified in the will. Executors must verify the charity’s legal status, facilitate the transfer of assets, and obtain receipts to ensure proper tax documentation. If the chosen charity no longer exists or has changed its mission, the executor may need to work with the courts under the doctrine of cy-près, which allows for the redirection of a charitable gift to a similar organization.

To avoid complications or disputes, testators should update their wills and periodically review their charitable designations. Consulting legal and financial professionals can help ensure the charitable bequest remains aligned with the testator’s objectives and the current legal landscape.

Best Practices for Including Charitable Giving in Your Will

To successfully incorporate charitable giving into an estate plan, individuals should identify the philanthropic causes they wish to support and determine the type and amount of their intended bequest. Consulting an estate planning lawyer can help ensure the will is drafted correctly, minimizing the risk of disputes and ensuring compliance with Ontario law.

It is also beneficial to discuss estate plans with family members and executors to clarify charitable intentions and reduce the likelihood of misunderstandings or challenges. Keeping records of charitable designations and communicating any updates to key parties involved in estate administration can streamline the process and prevent complications.

The Lasting Impact of Charitable Giving

Charitable giving in a will offers a unique opportunity to leave a meaningful legacy and support organizations that align with personal values. Whether funding medical research, supporting educational initiatives, or assisting vulnerable populations, a charitable bequest ensures that an individual’s generosity continues beyond their lifetime. By carefully structuring their estate plan, Ontario residents can maximize both the impact of their gift and the financial benefits available to their estate.

Contact Eisen Law in Toronto for Comprehensive Estate Administration & Litigation Services

At Eisen Law, we understand that estate matters are deeply personal. Our knowledgeable estate lawyers provide compassionate and skilled legal support relating to estate administration and litigation. We help clients navigate any issues that arise in the estate distribution process, including managing charitable bequests. Let us guide you through this challenging time. To book a confidential consultation, please call 416-591-9997 or contact us online.