Types of Gifts
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- Gifts of Life Insurance
- Gifts of Retirement Plan Assets
- The Reinsured Gift Annuity
- Gifts of Real Estate
- Gift of a Residual Interest
- Charitable Remainder Trusts
A charitable bequest refers to a disposition in a will to a Charity of a particular amount of money, specific property, or a percentage of the estate. In other words, a bequest is a gift of assets made through a will.
There are three basic types of bequests:
• Specific Bequest
Gift of a particular piece of property or a stated sum of money.
• Residual Bequest
Gift of all or a fraction of whatever remains (residue) after all debts, taxes, administrative expenses and specific bequests have been paid.
• Contingent Bequest
Gift takes effect only if the primary intention cannot be made.
Benefits to Donor:
Donor retains full control of gifted property for the duration of live and can make changes in the will at any time.
Donation receipt may be issued for the amount of cash or the fair market value of the property given to the charity. This may result in a tax credit on the donor’s final income tax return.
If listed securities are designated for the charity or if the executor is empowered to select the assets to satisfy a charitable bequest and selects listed securities – none of the gain in these assets will be taxed on the donor’s final return.
Almost everyone has life insurance. It could be group life insurance provided by an employer, one or more individual policies, or both.
There are various methods by which a life insurance policy may be contributed to the Charity.
A donor may:
• Transfer ownership of a paid-up policy to the Charity;
• Transfer ownership of an existing policy on which premiums are still owing or purchase a new policy, initially naming the Charity as owner;
• Name the Charity as the primary beneficiary of a policy;
• Name the Charity as the co-beneficiary to share the death benefits with others;
• Name the Charity as the contingent beneficiary to receive the death benefits only if the primary beneficiary(ies) is (are) not living.
At times RRSPs, RRIFs, or other retirement plans, and the value of the assets involved can be considerably more than an individual would ever need during retirement. A Charity can be named directly as beneficiary of RRSP and RRIF assets with full tax benefits and without the disadvantage of subjecting them to probate
The gift annuity is a contractual arrangement whereby a donor transfers assets to the Charity pursuant to an agreement authorizing the Charity to purchase a commercial annuity that will pay the stipulated amount for the life of the annuitant(s) or for a term of years. Assets in excess of the amount required for purchase of the commercial annuity are retained by the Charity and used for purposes specified by the donor and acceptable to the Charity. Determination of the gift receipt and taxation of annuity payments will be in accordance with existing law and instruction from the Canada Revenue Agency
Gifts of real estate may be made in various ways: outright, through a residual interest in the property, or to fund a charitable remainder trust.
A gift of a residual interest refers to an arrangement where real property is irrevocably committed to the Charity, but the donor retains use of the property for life or a term of years. For example, the donor might give a residual interest in a residence and continue to live in it. The donor is entitled to a gift receipt from the Charity for the present value of the residual interest.
The charitable remainder trust is a form of residual interest gift. The donor (“settler”) transfers property to a trustee who holds and manages it. The net income will be paid to the donor and/or other named beneficiary. When the trust terminates (either at the death of the beneficiary[ies] or after a term of years), the trust remainder is distributed to the Charity. If the trust is irrevocable, the donor is entitled to a gift receipt for the present value of the residual interest.
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