Charitable Giving through your Will:  By Maria Vanderspek

This article is written for our Canadian supporters – the tax implications related to wills in Canada is very different from those of citizens in the USA.

What is a Will?

 A will is a legal document in which you can provide for the payment of your debts as well as the liquidation and distribution of your assets in the event of your death. In addition, you can appoint within the document someone to be in charge of ensuring that your debts are paid and your assets are properly distributed. This person is known as the executor of the estate or estate trustee. The requirements for the preparation, signing and witnessing of the document, to make it a legally valid will, are outlined in legislation in each of the provinces in Canada.

Why Do You Need a Will?

 a) Orderly and Timely Distribution of Your Assets
Having a will ensures that the distribution of your assets at your death occurs in an orderly and timely fashion to the family members, individuals and/or institutions chosen by you and on the terms set by you. Passing away without a will does not immediately mean your assets go to the government in Canada or results in the government controlling the distribution of your estate. Legislation is in place in Ontario, for example, that permits family members to apply to become the estate trustee of your estate in the event of your death. In addition, Ontario has legislation in place that ensures your assets are distributed to your next of kin. However, until someone applies and is formally appointed as your estate trustee, your assets will be frozen and inaccessible by people such as your spouse and children.

 The legislation also only provides a set of default rules that apply to the public as a whole. However, individual situations regularly differ from what may be the case in general, causing complications for these individual situations that are not addressed by the default rules. In such circumstances, court intervention is often required to provide a remedy. This court involvement significantly increases the costs of administering the estate as well as the amount of time needed for distribution of the assets.

 b) Distribution of Your Estate in a Tax Effective Manner
A will also permits the proper organization of your assets to ensure that they are liquidated and distributed in a tax effective manner.

 When an individual passes away in Canada, the Income Tax Act acts as if, for income tax purposes, you have sold everything you own immediately before you pass away. This can create a significant tax liability issue where you own (1) real estate in addition to the home you live in, (2) investments where the earnings are in the form of capital gains, or (3) RRSPs or RIFs.

 By preparing a will in consultation with your tax and legal advisors, the tax liability issue can be anticipated and minimized.

 c) Opportunity for Giving to Charitable Organizations

 If you pass away without a will, the legislation in place only provides for distribution of your assets to your next of kin and your estate trustee is obligated to distribute your estate as directed by the legislation. The fact that your estate trustee has personal knowledge that you wanted to make contributions to charitable organizations from your estate is irrelevant. Your wishes, though verbalized, have no legal weight until formally written in a will.

Conclusion: Why You Need a Will

The Income Tax Act in Canada expands the charitable tax credit available to an individual in the year of death. Charitable bequests incorporated into your will can provide your estate with charitable receipts to take advantage of this tax incentive and assist in offsetting the tax liability issue discussed earlier in this article. As such, having a will can enable you to contribute to charitable institutions of your choice and provide an orderly and organized scheme for distribution of your assets.

Maria Vanderspek is a lawyer with the firm Cline, Backus, Nightingale, McArthur LLP, in Simcoe, Ontario. Maria also attends Grace Free Reformed Church, in Brantford, Ontario.

The material presented in this article is intended for information purposes only and does not constitute legal advice. 

Giving to Word & Deed

Word & Deed invites you to prayerfully consider including a bequest in your will for its ministries. We invite you to discuss making a charitable bequest to Word & Deed with your legal advisors. What follows is sample wording for a charitable bequest:

I hereby give to the Word & Deed Ministries Canada Inc. 39993 Talbot Line, Talbotville, Ontario, charitable registration number 891200941RR0001 [a specific percent] of the residue OR [a specific amount] of my estate, for its general purposes, as determined by the Board of Directors of Word & Deed Ministries Canada Inc. from time to time.