August, 2022
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Charitable Giving and Your Estate
Disclaimer: This article on charitable giving and your estate plan is intended for the purposes of providing information only and is to be used only for the purposes of guidance. This article is not intended to be relied upon as the giving of legal advice and does not purport to be exhaustive.
“You can’t take it with you.” This old saying illustrates that our material possessions won’t do us good after death. But it also highlights an essential truth about wealth and philanthropy: we can’t take our money with us when we die, but we can choose to leave a lasting legacy through charitable giving.
If you’re interested in incorporating charitable giving into your estate planning, this article will outline a few things you need to keep in mind. Of course, when it comes to estate planning, you want to discuss these options with your lawyer and accountant to ensure they are right for you.
Why Incorporate Charitable Giving Into Your Estate Plan
There are many reasons to do so, but here are just two:
1. You can make a lasting impact on your chosen causes and organizations.
One of the great things about charitable giving is that it allows you to direct your assets to causes and organizations you value. This means your money can continue to benefit others long after you’re gone.
Because you can specify how your gift is used, you can be sure that it will have the maximum impact. For example, you might choose to give to a scholarship fund that will help students from low-income families. Or you might support a cancer research center.
2. It can provide significant tax benefits for your beneficiaries.
Another great reason to incorporate charitable giving into your estate plan is that it can provide significant tax benefits for your beneficiaries.
For example, if your will includes a gift to charity, your estate will include a credit for that gift at tax time. This can save your beneficiaries a significant amount of money in estate taxes.
Three Tips for Charitable Giving and Estate Planning
We’ve discussed why you might want to incorporate charitable giving into your estate plan. Let’s look at three tips to help you do it effectively.
You do not have to gift cash.
One common misconception about charitable giving is that you can only do it with cash. But this isn’t true! You can also give other assets, such as stocks, bonds, and even real estate.
The advantage of giving non-cash assets is that they can be worth more than their original purchase price. You should consult with your financial advisor or accountant to see what types of assets would be best to give.
Give your executor flexibility with charitable giving.
When making your estate plan, you’ll need to name an executor to fulfill your wishes after you die.
One of the things you’ll want to do is give your executor some flexibility when it comes to charitable giving. For example, your financial situation may have changed since you made your estate plan, and your executor may need to adjust your charitable gifts.
Or, the organization you initially chose to support may no longer be in operation. By giving your executor some flexibility, you can be sure that your charitable gifts will go to an organization that is doing good work and that you would be proud to support.
This brings us to our next point…
Review your estate plan (including your chosen charities) often.
Your estate plan is not set in stone. As your life changes, you may need to make some adjustments. That’s why it’s vital to review your estate plan regularly and update it as required.
Review your estate plan regularly, especially if you have a major life event, such as a marriage, child, or new home.
If you incorporate charitable giving into your estate plan, be sure to review your plans and make any necessary changes. This will ensure that your generous gifts go to the causes and organizations you care about.
Estate Planning Designed For You
Your estate planning should reflect your unique circumstances and goals. At Beeksma Law, we understand that no two estate plans are alike. We will work with you to create an estate plan designed specifically for you and your family, including how to support the charities you care about.
If you currently have an estate plan, when was the last time you reviewed it? If it has been more than *** years, or if there have been significant changes in your life, it’s time for an update.
Contact us today to schedule a consultation. We can help ensure that your estate plan is up-to-date and meets your current needs.
Estate Trustee or Executor Fees in Ontario: How Much is Executor Compensation?
Disclaimer: This article on executor fees in Ontario and your estate plan is intended for the purposes of providing information only and is to be used only for the purposes of guidance. This article is not intended to be relied upon as the giving of legal advice and does not purport to be exhaustive.
We have previously discussed that being an executor, or estate trustee, is a weighty responsibility. To carry out the terms of the will requires substantial time and energy. These responsibilities include collecting and distributing the estate assets (including large items like any real estate) and paying any debts.
To carry out these duties, the executor must keep accurate records of the estate accounts and all transactions related to the estate. They must also act in the best interests of the estate and the beneficiaries of the estate. Depending on the value of the estate, this can be an onerous responsibility.
It is not surprising, then, that executors often may be entitled to compensation. However, the question becomes, how much can an executor be paid for their role?
In this article, we will outline how to calculate executor fees in Ontario. We will also look at how that applies to multiple executors and others who perform the tasks of an executor.
If you are an executor, you do not need to handle this heavy responsibility alone. You should seek guidance from a lawyer to ensure you carry out your duties correctly and in the estate’s best interests.
How much is executor compensation in Ontario?
Executor fees for administering an estate are provided for in the Trustee Act. It says:
61 (1) A trustee, guardian or personal representative is entitled to such fair and reasonable allowance for the care, pains and trouble, and the time expended in and about the estate, as may be allowed by a judge of the Superior Court of Justice. R.S.O. 1990, c. T.23, s. 61 (1); 2000, c. 26, Sched. A, s. 15 (2).
However, section 61 (5) states, “Nothing in this section applies where the allowance is fixed by the instrument creating the trust.”
What does this mean? The first step is to ask, “Does the will set a flat fee for executor compensation? Is there a clause explicitly stating an amount or percentage of the estate that will be paid to the executor?” If so, that is usually the amount that the estate executor will receive.
Generally speaking, we do not recommend including a clause in the will that will set executor compensation at a specific fee. This is because it can be challenging to determine the size and complexity of the estate beforehand. An amount may have seemed reasonable when drafting the will, but it may not be appropriate when actually administering the estate.
What if there is no provision for payment in the will?
What if there is no amount of compensation stipulated in the will? The Ontario courts have determined five factors in determining what is “fair and reasonable” compensation. These are:
- The size of the estate;
- The care and responsibility involved;
- The time spent by the executor performing the duties;
- The skill and ability demonstrated and required by the executor; and
- The success resulted from the estate administration.
In Ontario, the executor of an estate is generally paid a percentage fee – meaning it would depend on the estate value. Executors generally receive roughly 5% of an average estate. The Court has applied guidelines where an allowance is usually set at 2.5 percent for capital and revenue receipts and 2.5 percent for capital and revenue disbursements.
However, it is vital to remember that this is just a guideline. The court will ultimately decide what is fair and reasonable based on the circumstances of the particular estate. A simple estate may warrant a lower fee than a more complex estate and vice versa.
One fee for one role, no matter how many executors
In some instances, a will appoints multiple people as executors. The amounts listed above apply to anyone who is an executor. For example, let’s say that there are two executors and that 2.5% of the capital receipts is $10,000. The estate would pay $10,000 for both executors ($5,000 each), not $10,000 each.
This also applies to anyone who is not an executor but performs tasks that are part of the executor’s duties. If the executor hires someone to help with the estate, the executor will pay that person from their compensation.
Let’s use estate lawyers as an example. Estate lawyers are careful to carefully document their time. Are they performing work the executor usually does, such as notifying and reporting to beneficiaries? If so, they charge for their time as the executor.
If the lawyer were to charge the estate for those tasks, the estate would (in effect) be paying twice for the same performance. So those costs would be subtracted from the executor’s compensation.
However, on the other hand, a prudent executor is expected to seek out professional advice to ensure that the estate is being administered properly. In that instance, the lawyer would charge their time to the estate, and not deduct it from the executor’s compensation.
Navigating Estate Planning and Executor Fees in Ontario
The role of executor comes with many responsibilities. It can be a daunting task, made even more complicated by the fact that executors are not always familiar with their duties.
That is where we come in. At Beeksma Law, we have a team of experienced estate lawyers who can help you navigate the executor process from start to finish. We can help you understand your responsibilities and provide guidance on how to best manage the duties of an executor.
Our breadth of experience, from preparing estate plans to handling estate litigation, gives us the knowledge and skills to help you through every step. To learn more, please book a call with us today. We would be more than happy to discuss your specific needs.
Estate Planning Checklist: What happens to the family cottage
Disclaimer: This article on the family cottage and your estate plan is intended for the purposes of providing information only and is to be used only for the purposes of guidance. This article is not intended to be relied upon as the giving of legal advice and does not purport to be exhaustive.
For many families in Ontario, summer means one thing – the family cottage. For these families, the cottage may have been passed down for generations. It may be the place where family traditions have begun and where they continue year after year.
You must consider your family’s cottage when you create your estate plan. It may be one of the most important assets that you own. As such, you must have a plan in place for what happens to the cottage when you pass away.
We recommend starting with a family conversation. This is a conversation that should involve all family members who have an interest in the cottage to come to a consensus about its future. Once you have done this, you can begin to put together a plan.
Of course, your cottage is just one asset in your estate. You should speak to an estate lawyer about your entire estate plan.
In this article, we will outline a few scenarios of how your estate planning can impact the family cottage. We will also note some things to consider when planning for the future of your cottage.
The Tax Implications of Passing Down the Cottage
If you are considering passing down the cottage to your children, you must be aware of the potential tax implications. Canadians can have one “primary residence,”; any other property is a “secondary residence”.
Secondary residences are subject to capital gains tax when they are sold. This means that if your children sell the cottage, they must pay capital gains tax on any increase in the property’s value since you purchased it.
Your cottage has certainly increased in value since you bought it, so how will those capital gains taxes be paid? Your lawyer and accountant will be able to give you some guidance in this matter.
Now let’s review some specific scenarios related to the family cottage.
Scenario #1: You Gift the Family Cottage While You Are Still Alive
One option may be to gift the cottage to your children while you are still alive. This would allow you to avoid probate fees and potentially reduce capital gains taxes, as discussed above.
There is one thing that is important to note. If you gift the cottage while you are living, you won’t have any ownership or control over the property. As such, it is crucial that you only gift the cottage to someone who you trust implicitly.
Scenario #2: Leaving the Family Cottage to Your Children
You may love the idea of all of your children enjoying the cottage together for generations to come. However, it may not be the most practical solution.
If you have more than one child, it is likely that they will not all live in close proximity to the cottage. This can make it difficult to manage and care for the property. Siblings may also have different ideas about how the cottage should be used, which can lead to conflict.
There are three ownership structures to consider:
Co-Ownership
You can consider leaving the cottage to your children on the condition that they they enter into a co-ownership agreement. This agreement would set out how to use and maintain the cottage. If they cannot enter into a co-ownership agreement, the chances of them being cooperative co-owners is slim.
Joint Tenancy
If your children share the cottage as joint tenants and one passes away, the surviving owners divide their share equally.
Tenancy in Common
When a part-owner dies under a tenancy in common, his or her share goes to his or her estate and is dispersed according to the deceased’s Will.
Creating a Cottage Trust
One option can be to place the cottage into a trust, which is a separate taxable entity and will have reporting obligations. The benefit of doing so is that the cottage can be protected from any future creditors of the beneficiaries and can help to minimize estate taxes.
You can also stipulate the terms of the trust, much the same as you would in a co-ownership agreement.
However, there are some drawbacks. For example, you are not avoiding the tax implications altogether. Your heirs will still need to pay capital gains tax every 21 years.
Scenario #3: Leaving the Family Cottage to One Child
In some instances, only one of your children may want the cottage or be in a position to own and maintain it.
There are a couple of options for how you can address this situation. First, you may want to include an “option to purchase” clause in your Will, which would give the child who wants the cottage the first right of refusal to buy it from your estate at a fair market value.
Another option is to leave the cottage to one child but give your other children the cash equivalent if you have enough other assets to do this. This way, you treat everyone equally.
The Bottom Line
There are a number of things to consider when it comes to estate planning for the family cottage. It is best to discuss all of your options with a lawyer and accountant to ensure that you are making the best decision for your situation.
When it comes to planning your estate, you need advice that you can trust. At Beeksma Law, we understand the sensitive nature of these conversations and can provide you with the guidance you need to make the best decisions for yourself and your family. Book your consultation with our team today.