The Retiree ’ s Easy Guide to Leaving Something Behind
Rick Harcourt , PFA | Capital Estate Planning Corporation
It ’ s been said that there ’ s nothing certain in the world except death and taxes . What if I told you that phrase may only be half true ?
We spend our working lives earning and spending — and we pay taxes every step of the way . In our working years , our priority is building for the future — paying down debt , building life experience , maybe supporting family . Once we ’ ve taken care of those pieces , many of us start to think about leaving something behind — making a mark on our community and family that will outlast any of us .
Charitable giving is a way to do that .
How Charitable Giving Works
When we die , we leave everything we own behind . The Canada Revenue Agency ( CRA ) looks at all the things you own that could be taxable and charges all the taxes all at once . So , for example , all of these things will be taxable :
● all RRSPs ( Registered Retirement Savings Plans )
● all RRIFs ( Registered Retirement Income Funds )
● any property other than your principal residence
● any employment or pension income from that year
For example , suppose this list adds up to $ 200,000 in taxable income .
Taxable Income ( ex : RRIF )
$ 200,000
$ 127,000 to your estate
$ 63,000
Taxes to CRA
However , CRA rules let you donate significant amounts to charity and get charitable receipts back to cancel out your taxes . How much can you donate ? If you add up all of the income sources for the past two years ( things like pension , CPP , OAS , and so on ) plus everything that hasn ’ t been taxed yet ( like RRSPs , RRIFs , capital gains , and so on ) and put all those together , that ’ s how much you ’ re allowed to donate to charity and get a tax credit back .
It sounds great , right ? There ’ s one catch . ( There ’ s always a catch .) If you donate everything to charity , you ’ re leaving less to your heirs . For a lot of people , that doesn ’ t match with their priorities . So how do you solve that ? With insurance and a special fund . news & views SUMMER 2021 | 49