A charitable bequest is a gift made through your will and may include cash, marketable securities, real estate or personal property.
Why donate through your will?
- Bequests may allow you to make a larger gift than otherwise possible.
- Designations for bequests are revocable so you retain control of your assets during your lifetime.
- Reduce taxes owing from your estate.
Types of bequests
Residual bequest – Designate your entire estate or a percentage of your estate. Your donation will automatically adjust in size as your estate increases or decreases over the years. There is no need to update your will.
Specific bequest – Designate a fixed dollar amount or specific property. These bequests are the first to be distributed during the administration of an estate. If a specific property is designated, the bequest can only be fulfilled with that property. If you designate a specific property but do not own that property when you die then the University of Alberta receives nothing.
Example (for illustrative purposes representing donor residing in Alberta)
Alumnus Louis Somers, ’63 BSc, leaves a $150,000 cash bequest to the University of Alberta to create the Louis Somers Endowment in the Centre for Oil Sands Innovation (COSI), which will support breakthrough research that leads to environmentally and socially sustainable development of Canada’s mineable oil sands resources. His total net income reported on his final tax return is $100,000, and net income the preceding year was $75,000.
- Bequest is $150,000
- Amount creditable on final return is $100,000 (100% x $100,000)
- Amount of carryback on previous year’s return is $50,000 ($150,000 - $100,000)
- Total amount creditable is $150,000
- Tax credit (assuming combined federal and provincial tax credit of 50% in Alberta) is $75,000 ($150,000 x 50% = $75,000)
- Amount available to heirs (Amount of bequest less tax credit) is $75,000 ($150,000 - $75,000 = $75,000)
- As a result of the charitable bequest, income tax on Louis’s final return may be reduced or eliminated, and income tax on the amended return for the preceding year is substantially reduced.
- And, the $150,000 charitable bequest reduces the inheritance for Louis’s other heirs by far less than $150,000.