By: Michaela Ream
Q: What are ways to reduce the amount of income tax you owe?
There are three strategies here. First, have clarity as to what your estate tax will be and take steps to avoid it by naming charities as beneficiaries on your RRSP, RRIF and TFSA. Secondly, gift appreciated securities to a charity. And the third would be to have your will state you’d like to give cash to charity from your estate.
Q: How do you balance supporting loved ones and charity?
It’s a personal answer to each individual donor of how much to leave to their heirs and leaving an appropriate amount to charities. I like to use a 10 per cent rule, but it’s not cast in stone; it could be more than that. Some people want to give enough to charities to avoid how much tax they pay on their terminal returns by giving a certain amount to charity and the rest to their heirs. Setting up tax-free savings accounts and life insurance policies will also secure money without large taxes.
Q: What is a tax aspect that people don’t think about or forget to ask about at end-of-life preparation that could help reduce taxes?
Gifts to charity are the biggest ways to reduce taxes on an estate. Available capital losses are another way, so if an estate has available capital losses, they will reduce their capital gains by that amount. Capital gains or losses result from the sale of property, whether that is real estate, stocks, bonds, etc.
Q: What advice do you have for someone writing or reviewing their estate plan?
Coordinate a team of professional legal, accounting and wealth advisors. A wealth planner can provide documents like a financial plan and estate plan, which gives clarity to the whole team to execute the will and provide tax advice. A financial plan and estate plan are primary documents to make sure you’re looked after in retirement and outlines how to disperse any excess money — the earlier, the better to establish a financial plan to look toward the future.
Q: What advice do you have for donors regarding taxes?
Many donors don’t have a financial plan or estate plan in place. That is something to do first before anything else and, from there, we can determine all other life events. Once you have that in place, the plan gives you the confidence to execute your passions, like giving back to charities.
Interested in learning more? Join Randy for a free virtual seminar this fall, brought to you by the Alberta Cancer Foundation. Email the Foundation’s manager of legacy philanthropy at email@example.com to learn more.
The Alberta Cancer Foundation has partnered with Will Power, a national campaign aimed at showing Canadians how their estate can support the causes that are important to them and take care of their families. Visit willpower.ca/charities/alberta-cancer-foundation for information and tools, including a legacy calculator.