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Donations after death: an important tool for charitable organizations… and for you - DFSIN - SFL

Donations after death: an important tool for charitable organizations… and for you

Making a donation to a charity upon your death could be a way of maximizing the impact – without putting your children and other heirs at a disadvantage.

May 16, 2024

The portrait of charitable giving in Canada is paradoxical: while it seems that a smaller percentage of taxpayers are claiming the charitable tax credit, the average amount being donated is rising. This suggests that registered charities are relying on a relatively limited group of donors (fewer than one in five taxpayers), to support them with donations that are getting larger, on average.  

Given this context, have you ever wondered about how you could optimize the impact of your own contributions to the causes you care about? One avenue that is often overlooked is arranging for a posthumous donation. In fact, only 5% of Canadians have made provisions for charitable giving in their wills. Yet this could make a big difference to charitable organizations.  

Here’s why. 

The 1% example 

Planned giving specialists often use this example: suppose that when you pass away, the value of your estate, not including taxes, is one million dollars. Now let’s say that, in your will, you bequeathed just 1% of this amount to a registered charity. Your other beneficiaries – your children, for instance – would only be “deprived” of $10,000 and would still receive $990,000 to share. But for the charity, that $10,000 would be a significant donation, given that the average annual charitable donation is just under $2,400 per person in Canada.  

Actually, this type of donation, known as a bequest, is just one of many planned giving strategies that you might consider as a means of continuing to support the causes that are important to you after you’re gone. 

Main approaches to posthumous donations  

First of all, it’s important to understand that any donation to a registered charity can result in significant tax benefits for the donor and/or the donor’s estate. Depending on the planned strategy and the type of donation, making use of these benefits could be relatively simple or fairly complicated. That’s why planned giving is usually part of a broader overall estate and tax planning strategy, for which you would likely want your advisor’s input. 

That said, here are the main ways of making donations after death. 

Charitable bequest

As illustrated by the example above, this is a provision of your will making a bequest to a charitable organization. If it is a “universal” bequest, the entire estate goes to the designated organization; if it is a “specific” bequest, the organization receives a predetermined share (a portion or percentage of the estate’s net worth). “Residual” bequests provide for some or all of the estate’s value to go to the charity after debts and taxes have been paid and the other legatees have received their share. Finally, a “contingent” bequest may hinge on whether the principal heir is deceased when the estate is liquidated. 
Note that if the donation takes the form of listed securities or certain other eligible investments, the donated securities may be exempt from the capital gains tax. 

Life insurance 

Not many people can afford to donate several hundred thousand dollars. This could be possible, though, by designating a charitable organization as the beneficiary of a life insurance policy. If you own the policy, your estate would be entitled to a tax receipt when the donation is made. If the registered charity owns the policy, you would receive tax receipts during your lifetime for the ongoing premiums you would be paying, as well as for the policy’s cash surrender value or the fair market value, in the case of an existing policy. In the latter case, however, you would not be able to change the beneficiary designation afterwards. 


You can also leave your registered retirement savings plan (RRSP) or registered retirement income fund (RRIF) to a charity by designating it as the beneficiary or, in Quebec, by making it a legatee in your will. Note that the tax associated with the liquidation of your RRSP or RRIF would have to be paid first by filing your final income tax return. 

Charitable remainder trust 

A charitable remainder trust is a type of trust into which you transfer assets during your lifetime in order to leave them to a charitable organization upon your death. Meanwhile, you would receive an immediate tax receipt, as well as being entitled to the income generated by the assets invested in the trust. When you die (or after a specified period or when certain conditions have been met), the charity would receive the capital. 

Charitable gift annuities 

A charitable gift annuity is an interesting option if you would like to transfer a significant sum to a charitable organization. One part forms an immediate donation for which you would receive a tax receipt. With the remainder (usually 75% to 80%), the organization would purchase an annuity from an insurance company. This “charitable gift annuity” would provide you with guaranteed lifetime income. Note that the income amount would be based on a generally competitive rate of return and would likely be tax efficient. Upon your death, the residual amount of the annuity would, in principle, be paid to the charity. 

Last but not least, instead of donating directly to a charity, you could donate to your own charitable foundation (known as a private foundation) or to a public foundation where your assets would be pooled with those of other donors and used for charitable purposes. “Donor-advised” funds would be another possibility. 

If you have any questions about these more complex options or about planned giving strategies in general, your advisor can provide you with some initial insights and guide you to the appropriate resources. 


The following sources were used to prepare this article: 

CAGP, “Charitable Donations of Life Insurance - CAGP Guidelines.” 

CAGP Foundation, “Influence, affluence & opportunity: Donor-advised Funds in Canada.” 

Chaire en fiscalité et en finances publiques de l’Université de Sherbrooke, “Crédit d’impôt pour dons.” 

Heart&Stroke, “Get the facts: Charitable Gift Annuities.” 

Canadian Red Cross, “Donate RRSPs and RRIFs”; “Gift of Charitable Remainder Trusts.” 

Government of Canada, “Charitable remainder trust.” 


La Presse, “Dons testamentaires : changer des vies après sa mort.” 

Le Devoir, “Des fondations qui veulent changer le monde.” 

LegalWills, “Planned Giving: the state of charitable bequests in Canada.” 

Marcil Lavallée, “Tax Letter.” 

Will Power, “How a Donation in Your Will Can Benefit You AND Your Family.”