Minimizing Taxes During Estate Planning and Charitable Giving

Did you know that there are three possible beneficiaries to your estate? These are

  1. Your Family
  2. The Government
  3. A Charity

When a death occurs, the default beneficiaries of the deceased are their family and the government. However many people prefer to leave their wealth to a charity and their family. Naturally, this requires some planning ahead of time.

What most people don’t realize is that this can also be done in a tax-efficient manner and the individual in question can plan for this during their lifetime.

Tax Minimization Strategies

The following strategies allow you to minimize taxes and make sure that your family and preferred charity are the recipients of your wealth.

  1. Drawing up a Will
  2. Beneficiary Designation in a Registered Account
  3. Gifting Public Traded Securities
  4. Beneficiary Designation in Life Insurance

1 and 2. Drawing up a Will and/or Beneficiary Designation in a Registered Account

The simplest way to add a charity as a beneficiary is to update your will and/or make the charity a beneficiary in registered account.

Adding the charity as a beneficiary in a will or a registered account such as Registered Retirement Savings Plan (RRSP) or Registered Retirement Income Fund (RRIF) allows you to reduce or even eliminate probate or estate administration costs.

A legal professional can help you in adding a charity to your will and a finance professional can help you in adding it to your registered account.

3. Publicly Traded Securities

This is a new option in tax-efficient charitable giving.

You can give a gift of publicly traded securities to a registered charity. On your death, your estate has the option of avoiding the capital tax on these securities because even though they have appreciated in value they are still deemed to be disposed of. The estate will still receive a tax receipt for the full market value of these securities.

4. Beneficiary Designation in Life Insurance

By designating the charity as a beneficiary in your life insurance, a considerable gift can be created for the charity. This is because of the multiplication effect of a tax-exempt life insurance policy.

This strategy can help you reduce annual income taxes during your lifetime as the premiums paid in such a situation are eligible for a tax credit. It can also help in reducing or eliminating probate costs, estate taxes and administration costs.

Conclusion

Proper planning and implementation of these strategies can assist in settling the estate faster and allow more assets to be retained. This ultimately causes more wealth to be distributed to the family and the charity.

Feel free to get in touch with Syed A. Raza Professional Corporation to discuss your questions or concerns.

No Comments Yet.

Leave a comment