Charitable Bequest and the Charity Child
A Charitable Bequest is perhaps the simplest form of planned gift to arrange. It is made through a person’s Last Will & Testament
A bequest could involve gifts of cash, real estate or other property but usually is a set amount or a percentage of the total estate value that is gifted to charity – or a percentage of the donor’s estate that is gifted after family needs are cared for.
A unique way to incorporate such a bequest is to ‘adopt’ an additional child through your will, called the Charity Child. This means you would give a child’s share of your estate to a charity such as the Christian School Foundation for the benefit of Christian education generally, or for the schools of your choice. Such a bequest for Christian education will allow your final gift to support the schools in whatever way you prefer.
Benefits and features of a Charitable Bequest – Charity Child
- The donor is able to give cash, stock, property, etc.
- Special tax incentives are available for gifts of appreciated property
- This way of giving is simple to arrange
- This gift remains subject to probate when gifted
- You don’t need to give now, the Foundation receives the gift only upon the death of the donor
- Your support for the Christian schools continues for as long as you prescribe
Donors may elect to designate their charity child to receive a portion of their estate’s value that is greater or less than their other “real” children. These proportions can also be adjusted if desired each time your will is reviewed and updated (every 3 to 5 years). In many instances, the eventual donation receipt to your estate that is generated by this gift will offset the estate taxes owing. This consideration allows the heirs in many cases to receive nearly as much as if there had not been a bequest included in the will.
For many individuals and couples, adopting a child called Charity is the best way to begin with a planned giving commitment. It is well-documented by our partner organization, Christian Stewardship Services, that many Christian school supporters also wish to support one or more other ministries or kingdom causes with their bequests. This is wonderful! The Charity Child’s portion can be divided in any way you prefer. We just encourage you to follow through on good intentions and to go ahead and make that commitment – we can help.
What are the tax incentives?
A person who dies is deemed to have disposed of everything owned a moment before death. Fifty percent of any capital gains on appreciated assets or investments, with the exception of one’s personal residence, becomes taxable income (special rules exist for farm properties). In addition, where there is no longer a spousal beneficiary for RRSP or RRIF investments, the entire value of a person’s registered fund portfolio becomes taxable income at death. In most cases, there are considerable tax implications at death, as even those individuals with a modest RRSP or RRIF portfolio will likely end up in the highest tax bracket.
The maximum donation that may be claimed in the year of death is 100% of income, combined with the normal pension or employment income for that year. Any excess over that amount can be carried back one year.
When a donation from an estate is received, the Foundation issues a donation receipt for the full amount of the gift. The estate’s Executor is able to use this donation receipt to obtain tax credits offsetting income from the current tax year and the previous tax year. This is why charitable bequests essentially redirect money that might have gone to the government, and can be made at minimal cost to other beneficiaries included in the will.