Page 3 - Wellspring Legacy Giving Society News
P. 3

PHILANTHROPIC GIVING


          How RRSP/RRIF donations


          can benefit your favourite


          causes while saving taxes


          for your estate                                                                  KAREN SLEZAK, BBA, CPA, CA, CFP, TEP





          It often comes as a big surprise to the family that the value of mom or dad’s Registered Retirement Savings Plan
          (RRSP) or Registered Retirement Income Fund (RRIF) is fully taxable at the time of death. There are exceptions,
          but only if the RRSP/RRIF passes to a surviving spouse or a minor child. When this isn’t the case, the value of the
          RRSP/RRIF is reported on the parent’s final tax return along with income earned to the date of death and the
          deemed sale of other property (e.g., stocks, bonds, real estate). All that income may push the tax rate into the
          top tax bracket of 53.53% in Ontario. It can be quite disheartening for the family to lose more than half of mom
          or dad’s carefully saved RRSP/RRIF in taxes!

          I ask the children, “What if I could help you arrange your affairs so that you benefit your family and friends and
          be philanthropic rather than supporting the Canada Revenue Agency?” So far, most individuals opt to structure
          their legacies in ways that may benefit their family and chosen causes.




          Two possible ways to gift your RRSP/RRIF to a charity:



            1    Strategically liquidate your          2     Make your RRSP/RRIF gift after death.
                 RRSP/RRIF during your lifetime.

              •  This strategy involves drawing funds     •  Name the charity as the beneficiary of the registered
                 out of your registered plan and             plan so the funds are paid directly to the charity.
                 gifting it to a charity during your
                 lifetime, allowing you to see how        •  On your final tax return, the value of the RRSP/RRIF is
                 your gift is used to benefit others.        included in your taxable income. However, your estate
                                                             will receive a donation receipt for the same value.
              •  The withdrawals are taxable, but you
                 will get a matching donation receipt.    •  The donation may completely offset the tax or almost
                 The donation may completely offset          offset it depending on your tax bracket.
                 the tax or almost offset it depending    •  If you wish to leave part of the RRSP/RRIF to a charity
                 on your tax bracket.
                                                             and part to family or friends, you will need to work
              •  Only withdraw amounts that will be          with a lawyer to make the split designation in your will.
                 taxed in the lower and middle tax        •  In addition to fulfilling your charitable objectives,
                 brackets and seniors should watch that      making your gift through a direct designation allows
                 they don’t trigger a claw back of their     you to continue to benefit from the registered plan
                 Old Age Security, which occurs once
                 their income exceeds $79,845 (for 2021).    during your lifetime.
                                                          •  Your RRSP/RRIF funds are also not subject to Ontario
              •  Always ensure you review your               probate fees.
                 financial situation carefully with
                 your advisors.


            All of the ideas presented in this article are general and are not a substitute for professional advice specific to your particular situation.
   1   2   3   4