3 rules for maximizing charitable donations in your will

Q. We are preparing our wills and have been advised that charitable donations are credited at 100% in the year of death, and can be used to reduce or eliminate the amount of tax owed for that year. How do we word this in our will so our executor understands our wishes, especially when they may not know the amount of tax the estate will owe? Any advice you can provide would be greatly appreciated.
— Mary

A. The tax rules for charitable deductions change frequently, so there is no guarantee any will instructions prepared in 2019 will be tax-appropriate in the future when your will is read.

You have many charitable options available to you when making your will, and it’s best to consult a lawyer to ensure you’re properly informed before making any decisions. (Your favourite charity may be able to recommend lawyers who can help you.) For example, Mary, to help you achieve your goal of maximizing tax deductions on your charitable donations, you could donate specific real estate, insurance policies or financial instruments as gifts.

As to the second part of your question—how to ensure your wishes are carried out vis-à-vis your donations—consider these three tips when making charitable gifts in your will:

1. Identify the proper legal name of any charitable organization or foundation you wish to benefit. If there is confusion regarding the charity’s name, courts may need to decide who receives your gift. These added legal costs can reduce your gift’s value.
2. Ask your lawyer to provide instructions for what happens if your charity of choice merges with another organization or ceases to exist. Adding a contingency in your will can ensure your charitable intentions are specified with alternative charitable purposes.
3. If you have specific purposes in mind for your gift, ensure now that they are acceptable to your charity. For example, what if you specify your gift is only to be used for research? What can happen? The charity may not be able to accept your gift if it only provides medical services.

Ed Olkovich is a Toronto lawyer and certified specialist in Estate and Trusts.

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