Make a Transformational gift by “disinheriting” the taxman.

Like you, I’ve been involved with Brain Tumour Foundation of Canada for a number of years, starting just as my friend Dorothy was diagnosed with a brain tumour. I have had the opportunity to see the many wonderful accomplishments of the Foundation over the years, and the power and impact that a transformational gift can make, like the one left by William Donald Nash, who left a significant gift from his RRIF which has helped spur new research, or more recently by Theresa who has committed to a bequest.
 
In my own case, my wife Bridget and I have used life insurance to leave a gift to the Foundation upon our passing.  We’re doing this because we, like you, want to put an end to brain tumours. We are also doing it, because our governments have made donations like this extremely easy to do with a variety of tax incentives.

Did you know many people pay upwards of 50% tax on large portions of their estate?

When you pass away, the remaining value of your RRSPs,  RRIFs, and defined contribution pension plans is added into your income in your year of death, as well as you have to pay capital gains on things such as real-estate (except your primary residence) and non-registered investments. For many people this puts your tax rate at the highest possible level on a substantial portion of their estate. You can defer the bill if you have a spouse, but on their death, Canada Revenue Agency comes a knockin’ at your door to pay up.
 
Due to changes in last year’s federal budget, this means that your tax rate is likely in the range of 47-54% depending on your province, with 6 provinces (Manitoba, Ontario, Quebec, New Brunswick, Nova Scotia and PEI) now having potential taxation higher than 50% of income.  

Take from the government, give to the Foundation

Fortunately, Canada has one of the most generous tax treatments of donations in the world.  You can utilize this to your advantage, by leaving a gift to Brain Tumour Foundation of Canada and dropping your tax bill at the same time. With some good planning work, you can often leave your family with the same inheritance, and redirect your tax to the good work being done by Brain Tumour Foundation of Canada.

Great ways to support Brain Tumour Foundation of Canada and reduce tax at the same time.

Along with leaving a bequest in your will, here are some of my favourite strategies:

Set Brain Tumour Foundation of Canada as a beneficiary of your RRSP or RRIF

You can ask your financial institution for a multiple beneficiary designation form, which lets you name more than one beneficiary. Put down Brain Tumour Foundation of Canada for a percentage of the value of your account, and at your death, the funds transfer to Brain Tumour Foundation of Canada, and your estate will receive a donation receipt  for the amount received. In most provinces, the tax credit you receive wipes out the tax payable on that portion of the RRIF or RRSP.

Set Brain Tumour Foundation of Canada as a beneficiary of your Life Insurance Policy.

If you have an existing life insurance policy, you can set Brain Tumour Foundation of Canada as a percentage beneficiary, or you can set up a brand new policy with Brain Tumour Foundation of Canada as a beneficiary. In either scenario, your estate will get a tax receipt at your death to help offset taxation. This can be very cost effective, as you might pay less for the insurance in your lifetime relative to the benefit to your estate than many other methods.

Donate appreciated shares, mutual funds and other securities in-kind.

This is a very effective strategy to use in your lifetime.  If you have publicly traded securities such as stock, mutual funds, bonds etc. that have gained in value since your purchase, you can donate these in-kind to Brain Tumour Foundation of Canada through your advisor/broker.  
 
If you donate these in-kind (without selling them first), the government will waive the capital gains tax owing and you still will receive a tax credit for the fair market value of the securities – its like a double tax reduction!  
 
If you are a business owner and  happen to have a corporation which has investments inside it, the news gets even better – the full value of the gain at the time of donation is credited to your Capital Dividend Account, and you will then be able to issue a special tax-free capital dividend out to shareholders after your donation.

These are just a few of the possibilities.

Talk to your accounting and financial advisors for more possibilities.  If you need expertise in this area, members of the Canadian Association of Gift Planners are specialists in this area. You can find a list of members for your local area at http://www.leavealegacy.ca/program/help/advisors
 
This article has been generously provided courtesy of Ryan Fraser, CFP CIM and volunteer with Brain Tumour Foundation of Canada. Thank you Ryan.

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