A LEGACY
WITHOUT
LOOPHOLES
BY DONALEE MOULTON
After a lifetime of saving money,
Canadians need to determine
where that money goes when they
are no longer here to enjoy it.
Many are opting to leave a legacy.
Individuals making a will
have three options: they can
leave their estate (or part of it)
to their children, hand it over to
the taxman, or bequeath it to a
charity.
“Many feel their children
already have enough, and they
don’t want to give it to the government,” says Bruce Harris, a
tax partner with Pricewater-houseCoopers LLP in North
York, Ont.
That leaves charitable donations, which can be made while
an individual is alive or after he or
she dies, or both. Such donations
must be put into context, says
Tom Zurowski, a partner with
KPMG Enterprise in Saskatoon.
“Planned giving is not dis-
cussed in isolation but is part of
an overall review of a person’s
wishes for their business or
estate planning,” says Zurowski,
a chartered accountant. “This
includes assembling a compre-
hensive list of assets and liabil-
ities, including estate taxes that
may arise, and discussing what
they wish to happen while they
are alive and then how the
remaining items will be dealt
with in their will.”
It’s not as simple or straight-
forward as plucking the name of
a favorite charity or two out of a
hat — professional guidance is
often needed.
Altruism aside, legacy dona-
tions have another distinct
advantage: leaving the taxman
with less. “Tax planning is
critical,” Dyer says. “If you have
the prospect of significant cap-
ital gains when you die, then
your estate can be writing a big
chunk to the government. You
can write off a large portion of
that or eliminate it entirely with
philanthropic efforts.”
Quite simply, Zurowski says,
“the donation also factors into
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the overall tax liabilities since
donations while alive or made
under the will can be deducted,
which reduces income taxes.”
But A does not always con-
nect logically to B, especially
when tax laws are involved, cau-
tioned Harris at Pricewater-
house. “From a tax perspective,
you would think it would be easy
to make a donation and get tax
relief. It may not be that easy.
You need professional help.”
Care also is required in draw-
ing up the will itself. Little
things, such as using the
incorrect name of the charity,
can result in big legal problems.
“You have to identify the charity
very carefully and clearly,” Dyer
says. “You don’t want a will to be
so loose it can be open to con-
flicting claims.”
Organizations will go after
what they see as rightfully
theirs, Harris says. “Charities
these days are very aggressive.
They will come with their advo-
cate if they know they are
included in a will.”
It’s also important to under-
stand the implications of a
bequest from a larger perspec-
See Legacy Page S11
