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Adopting a Child Called Charity

Adopting a Child Called Charity

May 20, 2021

Adopting a Child Called Charity

If you were to ask the average Canadian who they are leaving their estate to, most would shrug their shoulders and say, “Well, my kids of course.” However, the government, along with your kids, can be a very significant beneficiary of your estate. And the best way to avoid that is to include gift planning in your estate, creating tax benefits that could completely write the government out of your Will.

A concept of gift planning encouraged by our partner, ADVISORS with Purpose, is for families or individuals to “adopt” another child and to include this "Child called Charity" in their Wills. The idea is that if you have three children, your estate would be set up to be distributed between four. If you have eight children, your estate would be divided between nine. Very simply, this means that your Will directs a gift equal to a child's share of your estate to one or more of your favourite charities.

To make this concept really simple and effective, a public foundation like UCB Canada may be named as the beneficiary of the "Child called Charity" share, and you would prepare a Letter of Direction that would be held in UCB’s files for implementation at your death. You may, of course, direct the donation directly to a charity, but here are some advantages to this concept:

  • The Letter of Direction can be changed at any time without having to change the actual Will, saving time and money.
  • It offers donors the opportunity to make their gifts anonymously.
  • It makes the Executor's job easier by eliminating the need to inform and deal with multiple charities and by receiving only one donation receipt.
  • Your other beneficiaries ‘give up’ very little since they benefit from the donation receipt that results from the gift.

Example of the 'Child Called Charity' Charitable Bequest:
Mark and Susan Jones are in their 60's and have 3 adult children. Their after tax Estate is valued at about $500,000 through a combination of their home, their RRSP accounts and some savings. If they were to divide it equally between their three children, the kids would each receive $167,000.

However, through their Will they wish to remember some charities they have faithfully supported through the donation of time and money during their lifetime. They’ve chosen to divide their estate into 4 equal portions by including a “Child called Charity”.

In this scenario, the children do receive less than if they had split the estate 3 ways, but receive more than the “Child Called Charity” because of the tax credits that result from the donation to charity. Their beneficiary share hasn’t decreased by much over the scenario without a charitable gift, but their parents have left a meaningful legacy through this distribution.

If you would like to learn more, please contact our partners at Advisors with Purpose and schedule a meeting with an Advisor. It is absolutely free, there is never an obligation, and we promise that no one will sell you anything.

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