Dear CRA – My will won’t be leaving you as much money as you might expect…
We recently celebrated Canada Day on July 1 and I hope it was a fun holiday for you and your family. Another very significant date at this time of year is Tax Freedom Day calculated by the Fraser Institute. This year it was June 14, almost half-way through the calendar year and representing 44.7% of earned income. June 14, 2019 marks the day of the year when the average Canadian family has finally paid all their taxes to the federal, provincial and municipal governments for the year.
Lots of Canadians grumble about all taxes paid during their lives and those that will be paid at the time of death. Are you happy with how the government uses your tax dollars? Do you think you could make better contributions to society with the same amount of money?
I work with many single women who have accumulated savings and investments and are concerned about taxation of their estate when they pass away. They would much rather give money to their favorite charities than the CRA. And they don’t want to disadvantage their heirs. Fortunately, our tax system makes it possible for you to benefit charity(ies) and not leave your family resentful because of your generosity.
Let’s imagine you are a single woman with an RRSP or RRIF worth $200,000 when you pass away. If no charity is named on your account or in your will, the full amount will be taxable to your estate at the highest tax rate on your final tax return. Your heirs will receive the balance only, equal to roughly half that amount.
Now, suppose you leave $100,000 to one or more charities. Your estate is now entitled to a tax credit for 100% of that donation. This results in the overall tax burden being significantly reduced. Your estate will pay a lot less tax, with the tax refund benefiting your heirs.
The math is a little complicated; but the result is clear; CRA gets less, the charity receives a welcome donation, and your heirs still benefit. Moreover, you can even use an insurance policy to fund the bequest.
Is there a cause that tugs at your heart strings? At Assante, we have the expertise to help you designate part or all of your estate to multiple charities. Contact me to review your financial situation and let’s do some planning to fund your legacy.
It’s just good advice.