Tell Me About The Legacy You Want To Leave
By David Christianson, BA, CFP, R.F.P., TEP
As we get older, we inevitably start to think about issues like mortality. Lately, though, I have found myself thinking about people who have achieved a measure of immortality, by making a lasting difference in their community.
Think of a few such people. Who is on your list?
Internationally, there are many examples, such as Alfred Nobel, founder of the Nobel Prize, and Andrew Carnegie, whose endowment of Carnegie Hall created a goal destination for generations of musicians and performing artists.
Locally, we have an increasing number of well-known examples, like the Asper School of Business, the John Buhler Research Centre for medical research, and many, many others. But, each year, there are also countless vital legacies created by people who are not household names, but who make a significant and lasting difference to our community.
“Everyday” people of more limited means have always been the lifeblood of community organizations. Their donations and volunteerism over the years have allowed those organizations to make our community a better and richer environment in which to live, work and raise a family.
Increasingly, I find these same everyday people are thinking about the permanent legacy they can leave to the organizations they support – how they can achieve their level of immortality.
This can be done in a variety of ways. Naming the organization in a Will, to receive a gift or the residue of the estate, is common. Often, people can give much larger gifts on their passing than they could during their lives. These gifts also create tax credits to offset taxes that might otherwise be payable by the estate.
Speaking of tax benefits, a gift “in-kind” of appreciated securities – like shares that have been owned a long time – both eliminates the capital gain on the shares AND provides a tax credit based on the current value of the gift. “Flow through share” tax shelters are particularly well suited to this.
Life insurance policies – either existing or new – also create an opportunity to permanently endow an organization with a legacy, and also a means to multiply the amount a person could otherwise give. Since a life insurance death benefit is often much larger than the amount paid into the policy (which can also be paid in over time), many people use this as means to provide a much larger legacy gift.
For more detail on the uses of life insurance to leave a legacy, go to: http://www.davidchristianson.com/2009/10/turbocharge-donations-with-life-insurance/
Naming a charitable organization as beneficiary of a life insurance policy also creates a tax credit for the estate. A similar tax benefit is available when a person names a registered charity (or cultural organization) as a beneficiary of their Registered Retirement Savings Plan (RRSP) or Registered Retirement Income Fund (RRIF). Such accounts can also be left partly to family and partly to charity.
Annuities can also be purchased which will pay a lifetime income to the person making the investment, then leave any remainder amount to charity on death.
In all cases, you may receive some resistance from employees of your financial institution, for whom this may be new information. If you run into this resistance, persist, as everything we have talked about here is commonly done and specifically allowed by the Income Tax Act.
In all cases, consult your financial and tax advisors for personalized advice on the strategy that will work best for you and your family. Often, creative planning can allow you to leave a substantial gift to a charity, without a significant reduction to the amount you leave to your family.
There are many ways that a person can leave a lasting legacy to an organization that will permanently benefit the community. Take a few minutes to look at how you can make a difference, and how you can be remembered.
Post questions and comments.
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David Christianson is a fee-for-service financial planner and portfolio manager, whose team at Wellington West Total Wealth Management Inc. provides comprehensive financial advice and management. You can e-mail him at dchristianson@wellwest.ca or visit his website at www.davidchristianson.com.