Planned Giving: Wills and Bequests
Ways to Give
There are many ways to support an arts organization through a donor’s estate planning. The simplest is a bequest, which is a gift made by a Will. The donor, typically a long-time supporter of your organization, provides in their Will for payment to you of either a stated cash amount, a gift of securities, or a share of the residue of their estate. The gift is paid once estate administration requirements are completed and expenses and taxes have been settled.
A bequest is one last opportunity for a donor to express their support financially through a gift from their estate. The gift may be unrestricted as to how the arts organization can use the funds, or it may be directed towards a particular program or initiative of the organization.
The amount of a bequest may equal the donor’s annual giving, or it may be larger, with the intent of providing financial support over a number of years. For your donor, a bequest confirms their charitable intention to include your organization as part of their estate plan and offers flexibility. A bequest only becomes final at death, and the donor reserves the right, through changing their Will to increase or decrease the gift should their life or family situation change over time. Once you are aware of an intended bequest, it is wise to stay in touch with the donor to thank them for their generosity, answer questions about their intentions ( would they like to be recognized ) and stay connected with the donor, potentially over a number of years.
There are several options for a bequest:
• Specific property, such as securities, or real estate
• Share (%) of the estate residue
As your donor works with their professional advisor(s), the wording in the Will may say:
Unrestricted bequest – “To pay the sum of $xxxx to (your organization legal name ), to be used for the general operations of the arts organizations, and be used where it is most needed.”
Restricted bequest – “To pay the sum of $xxx ( your organization legal name ) to be used for ( the donor will direct the bequest to a particular program).” Be sure to have a conversation with the donor to ensure their intent can be achieved and fits within your arts mission, program, or operations.
Bequest of a share of the Estate – “ to pay and transfer ( x number) of shares of my estate to your organization (legal name ). It is important to use your arts organization’s full legal name.
It is also a good idea to include your organization’s charitable registration number as a way to avoid any risk of confusion as between two organizations whose names may be similar.
A bequest offers no immediate tax benefit to the donor when he/she prepares their Will.
The income tax rules around bequests changed in 2016. Formerly, the tax benefit was quite simple – the amount of the bequest was fully deductible against all sources of income and capital gains in the deceased donor’s final tax return, and if not fully used, could be carried back one year.
The new rules are a bit more complicated, but continue to be beneficial as a way to reduce income taxes to the estate. Canadian tax rules now consider the bequest to be made when the actual gift is transferred and paid to the charity by the executor or estate trustee. The donor’s advisors will have more detailed information on the tax benefits of the new rules.
Things to remember
Encourage your donor to speak with their professional advisors to ensure the bequest fits well with their estate plans, and can take full advantage of all tax planning and credits through their estate.
With the new rules, the estate administration may take longer, which may extend the time between the death of the donor and receipt of the gift. Discuss this with the executor or estate trustee so that you will know when reasonably to expect to receive the gift.
And, most importantly – acknowledge the gift and recognize the support of the donor as you learn of the planned gift, and thank the donor’s family, once the bequest is paid. They can be the next generation of supporters for your organization.