Why Not Consider Leaving a Legacy Before Your Will is Read

If you are fortunate enough to have saved – or inherited – more than you need to live your definition of the good life, you’ll have the opportunity to decide where and how to direct funds that are left unspent.

Most people plan to leave an inheritance to family members. Perhaps a portion is earmarked to go to a favoured charity.

Related:  5 Estate Planning Strategies Your Executor Will Thank You For

Unlike the U.S., Canada has no estate or inheritance tax, but death can trigger a significant tax bill when assets are sold or there is a “deemed disposition.”  As well, provinces charge probate fees. 

For example, on an estate valued at $250,000, probate fees can be as low as $400 in Alberta and in excess of $3,000 in Ontario.

Leave a legacy

If a retiree finds themselves with a surplus of funds beyond lifetime wants and needs, they may have the opportunity to make a difference to others.  But instead of waiting until death to disperse your assets, why not make gifts to those people whilst you are still alive?

Not only could you save substantially, but you’ll also have the satisfaction of seeing how the recipients benefit from your contributions.

If your family is important to you:
  • Fund RESPs for your grandchildren.
  • Contribute to a down payment for a first home purchase.
  • Provide capital to help an entrepreneurial-minded family member start a business.
  • Take a large family trip with children and grandchildren – perhaps to an all-inclusive resort.

You can help your family members when they need it most.

If education is important to you:
  • Pay university costs for your children or grandchildren or a great kid you know who can’t afford the education of his or her choice.
  • Contribute to a scholarship, or establish one of your own.

You can make thoughtful choices concerning your wealth and think about the effects on the lives of the people who are important to you. 

If philanthropy is important to you:
  • Support a hospital or shelter to help those in severe need.
  • Fund the arts – music, theatre, and artistic works – that enrich our lives.
  • Support national, global, or community organizations, or start your own charitable foundation. 

For charitable donations, some investments will not trigger capital gains taxes.

Think of it as investing in your values to make good things happen for and through the people and organizations you care about.  You’ll derive a great deal of satisfaction knowing your resources are making a difference.

Caveat

Make sure your own financial needs are 100% taken care of before considering early inheritances.  That includes sufficient retirement income, long-term care needs, and of course, you should be debt-free.  You don’t want to deplete your resources only to become a financial burden on others.

Be aware that giving capital property to family members – real estate or investments – may trigger capital gains tax, as the property will be deemed to have been sold at fair market value.  The CRA is alert to people trying to avoid tax by shuffling around their assets.

To lessen any possible family ill will, try to equalize your giving.

The bottom line

If your finances are in good shape you can share the wealth while you’re still around to enjoy helping others. You may find great satisfaction in converting your financial resources into actions and values you truly care about and making a positive difference in people’s lives.

If you plan carefully, you can reduce your taxable estate and provide advance help to your beneficiaries. 

It would be welcome for the recipient and gratifying to the giver.

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