Charitable Giving – a vague gift
- Giving an example of a vague gift – to an unspecified fire hall
- Explaining the importance of being clear about what entity you want to receive your gift and how it is used
- Explaining that for a charitable tax break, the entity must be a registered charity
A new estate file has come across my desk where the generous deceased, I’ll call her Kim, left some of her estate to “the West Kelowna Fire Hall for use to help with wildfire support”.
It wasn’t a do-it-yourself will. Kim paid a lawyer or notary to prepare it. I’m not going to disclose who that was.
The gift is vague: What is the “West Kelowna Fire Hall”?
To me, a “fire hall” is a building, traditionally built with red bricks, housing fire trucks and maybe a brass pole.
West Kelowna has four such buildings: West Kelowna Fire Rescue Stations 31, 32, 33 and 34.
The closest fire station to Kim’s home is Station 33. Maybe it didn’t occur to her that West Kelowna had others.
Or maybe Kim was intending to refer to the West Kelowna fire services generally. If so, that’s a department of the City of West Kelowna called West Kelowna Fire Rescue.
Regardless, it’s all operated by the City of West Kelowna.
A gift to the City of West Kelowna is essentially a gift to the taxpaying residents of West Kelowna.
Ugh!!
Never fear. The incredible West Kelowna Fire Chief Jason Brolund has led us through the McDougall Creek Wildfire. Surely, he will be able to come up with a way for Kim’s bequest to become a meaningful one.
I’m thinking the acquisition of some extra piece of wildfire fighting equipment used out of Station 33 that doesn’t fit within the department’s budget.
Perhaps with Kim’s name etched into it.
Unfortunately, though, Kim’s estate will not benefit from the charitable donation tax credit that is available only when a donation is made to a registered charity.
The City of West Kelowna is certainly not a registered charity.
Estates are often saddled with a huge tax bill because of Canada’s “deemed disposition” tax rules. If you’re interested in what that means, use “Hergott: Fantasy Land” as a browser search – the first result is likely a Black Press publication of one of my columns.
Leaving money to a registered charity reduces that tax bill.
With effective tax planning, and a bunch of your estate going to charity, you can reduce your estate’s tax bill to zero.
But you can’t leave your money to any old good cause. Many registered societies do excellent work in our communities and could use financial support. Your estate won’t get a tax break unless they’re a registered charity.
There are lessons here.
Be crystal clear about what entity you want to benefit from your estate. Kim’s will would best have named the City of West Kelowna as beneficiary.
Or maybe identifying the municipality as the true recipient of her gift might have led her to a more charitable cause?
If you care about how the donation is used, give that direction.
Kim’s will could have clarified: “…to be used for the acquisition of wildfire fighting equipment, used out of Station 33, that would not be purchased by the City of West Kelowna without my donation”.
If you want your estate to benefit from the tax break, ensure the entity is registered with the CRA. You can access a searchable list by using “Registered Charities Canada” as a browser search.
Charitable giving though your will is a broad topic. E-mail me any issues you would like me to write about on this topic, and I will consider a series.
