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Donor Advised Fund In Will

Benefits Of Naming A Donor-Advised Fund In Your Will

Learn about the many benefits of donor-advised funds and why you should consider including one in your Will.

When was the last time you donated to a charity? Probably pretty recently. After all, Canadians are giving folk! According to a recent survey, around 82% of Canadians donate to charities throughout their lifetime.

But, when it comes to planned giving (or legacy giving), many Canadians miss out on the opportunity to make a charitable contribution in their Will. Only 5% of Canadians include a charity in their Will! But leaving a charity out of your Will means you miss out on two important things:

  • Having a significant impact on the causes you care about most

  • Tax savings that come with legacy giving

So, what's the deal with this 77% discrepancy?

Why Canadians don’t include charities in their Will

One huge barrier to legacy giving is simply analysis paralysis. There is an abundance of registered charities to choose from–over 86,000, to be exact–so it can be hard to narrow it down to just a few.

The volume of choice can be overwhelming for people, especially knowing that their passions and desires may change as life goes on. The result is that people avoid the option entirely and don’t include a charity in their will at all.

This is where a donor-advised fund (DAF) comes in handy!

What is a donor-advised fund?

A donor-advised fund is like a savings account but specifically for money that will go to charity. DAFs are typically administered by a registered charity, like the MakeWay Foundation or the Charitable Impact Foundation.

Using a DAF, individuals can set aside funds for charitable giving—taking the time and space needed to decide where to give.

Another handy feature of a DAF is that it can also facilitate legacy giving.

Benefits of naming a DAF in your Will

Since public charities operate DAFs, you can choose to name a DAF in your Will instead of a specific charity. There are many benefits to doing so:

Maximize the legacy you leave for charities and your family.

One big misconception around legacy giving is that giving to charities in your Will will take away from the legacy you leave behind for your family members. This simply isn’t the case.

According to Rick Goldring of The Bay West Group Inc:

With proper advanced planning, tax can be reduced dramatically (or eliminated) with the legacy being left for family and charity being maximized.
With proper advanced planning, tax can be reduced dramatically (or eliminated) with the legacy being left for family and charity being maximized.

When you put money into a DAF, you get an immediate tax receipt for the fair market value at the time of donation. When you claim your tax receipts, you can reduce the income tax you owe by up to 53%, depending on the province where you live. Less income tax dollars owing means more dollars available to be distributed to your loved ones.

We know tax credits aren’t your primary motivation for your charitable giving—but it doesn't hurt! Especially when it means your loved ones can benefit from the savings after you’re gone.

Have time to decide which charities and causes you want to support

Instead of feeling overwhelmed by all the options, you can start building up charitable dollars today and decide which causes to support later. This kind of flexibility takes the pressure off when committing to which charities to name in your Will.

Throughout your life, your motivations and passions will change, inspiring you to support various causes. A DAF gives you the flexibility to redistribute your charitable dollars to the causes you choose during the phase of life you care about them the most.

Without a DAF, if you ever want to choose a different charity to name in your Will, you’d have to draft a new Will and go back through the process of making it legal (getting it witnessed.)

Or, you can create a codicil (a document that gets attached to your existing Will,) which would require a lawyer and their accompanying fees. Either way, without a DAF, choosing to name various charities in your Will can be a time-consuming and potentially expensive process.

Support multiple charities of your choice with one donation in a variety of ways

As mentioned, when you name a DAF in your Will, you get to decide how the fund distributes its charitable dollars by designating one or more charities. But that’s not your only option.

You can pass the decision on to the executor of your Will. Your executor is someone you trust you who appoint to carry out the wishes of your Will. If you’d prefer that they distribute the money in your fund, you can choose to do so.

And as a final option, you can even pass the funds in your DAF down to a beneficiary. This way, you can share the joy of giving with your loved ones and let them take the time and space to decide where to give.

Donate more than just dollars

DAFs allow you to leave more than just cash to charities. You can donate public securities, real estate, privately held companies, and art (to name a few.)

Final thought

Donor-advised funds help people overcome many of the obstacles that prevent them from naming a charity in their Will. They not only make legacy giving much more accessible for people who may not know what charities to select at the time they make their Will but offer more flexibility than naming charities in your Will directly.

In no time at all, you can complete your estate planning and set up a DAF to ensure your charitable legacy lives on the way you want it to—without ever leaving the comfort of your own home. What a time to be alive!

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