Legacy Month: How Leaving a Legacy Works for You
Legacy Month: How Leaving a Legacy Works for You
Erin Naylor
Ahead of legacy month, former London Community Board Chair Erin Naylor - a wills, estates, and corporate lawyer with Scott Petrie LLP - discusses the benefits of legacy giving and how you can leave a gift in your will to London Community Foundation.
Q: What is legacy giving?
Legacy giving, or “planned giving”, is arranging during your lifetime a charitable gift to be given upon your passing. There are various mechanisms of giving this gift, including a gift set out in your will, and naming a charity as a designated beneficiary in a registered plan or life insurance policy.
The particulars of the gift are also varied; a lot of times, this is a specific dollar amount (cash legacy) or a proportion of the residue of an estate (gift of residue), but it can also be a specific asset, such as shares in a corporation.
Q: What is the benefit of leaving a legacy gift in my will?
The benefits are varied and depend on the testator, but generally fall into two groups: financial benefits and intangible benefits.
Financial Benefits
The financial benefits will depend on the testator, the nature of their estate, and the nature of the gift, but generally speaking, a legacy gift will provide the deceased’s estate with a donation tax credit to apply against the income taxes due by the deceased taxpayer and/or the estate. Unlike tax credits for donations made inter vivos (during a person’s lifetime), there is generally no limit to the donation tax credit for a legacy gift. Where assets such as securities are donated, there can be additional tax benefits, such as the elimination of capital gains tax.Intangible Benefits
The intangible benefits are even more personal to the testator and include supporting causes and/or organizations that were important to the testator during their lifetime, honouring a loved one, and sharing a special cause or organization with the surviving family and friends.
It is important to understand that legacy giving can’t be left up to the surviving family, at least not in a way that maximizes the financial benefits, and sometimes not at all – such as in situations where beneficiaries are minors or incapable, or where wishes that are not set out in the will or by beneficiary designation are not carried through.
Q: Who would you recommend legacy giving to?
Everyone! There can be a misconception that legacy giving is only for very high net wealth people, but there are benefits, both financial and intangible, for people of all asset levels. For many estates, including more modest estates, by far the largest expense is the tax liability on the deceased’s terminal personal income tax return, due to the deemed disposition of capital assets at death. The financial benefits discussed above can make a big difference.
Q: Why should I work with London Community Foundation to help build my legacy plan?
People wishing to build a legacy plan have the why, and sometimes the who, but London Community Foundation provides the how and can help with the who.
There are a number of different options for legacy giving through London Community Foundation, including donating to an existing fund, creating a new fund, and flowing funds through the Foundation to charities, so the specifics of the how will depend on the option chosen by the testator. London Community Foundation staff work one-to-one with the testator and their advisors to develop the plan that works for the testator and provide ongoing support in succession planning.
For those who are not settled on the who, or even those who have certain charities that they support but are also open to hear about charities doing great work they hadn’t donated to before, the Foundation provides two important benefits. One benefit is the deep community knowledge and connections of the staff, who are intimately aware of the work done by charities in London, Middlesex and neighbouring First Nations. The second benefit is flexible donor agreements, which allow the donor to personalize their giving plan, and continue to tailor the plan to their needs and wishes even after the will is finalized.
For the administration of an estate, legacy planning through London Community Foundation means that even when multiple charities are being supported, the estate trustee will be dealing with one organization and receiving a single tax receipt, which can significantly reduce the administrative duties of the estate trustee.
Q: Is adding a legacy gift in my will complicated?
No! Ok, it does depend on the planning behind it; leaving a cash legacy of X dollars is much more straightforward than planning for the minimization of the tax implications of shares in a privately held corporation on death. But the beauty of arranging the legacy gift through London Community Foundation is that the provision in the will is basically “$X [or Y asset] to the Z Family Fund at London Community Foundation”. All of the details – the charities that will be supported, and how they will be supported – are contained in the donor agreement with the Foundation.
Q: I already have a Fund with London Community Foundation and want to leave a legacy gift. What do I need to do formalize my plans?
You would just contact the philanthropy team at London Community Foundation to create a bequest agreement and talk to your lawyer about updating your will.
To learn more, contact the philanthropy team at London Community Foundation:
Jennepher Cahill, Director, Philanthropy
jcahill@lcf.on.ca
519-667-1600 ext. 208
Emily Van Zeggelaar, Manager, Donor Services
emily@lcf.on.ca
519-667-1600 ext. 119