Do you think making a charitable bequest through your Will may be too complicated and take too much time and money? Many financial planners who specialize in estate and charitable tax planning suggest you may want to consider designating a portion or all of your Registered Retirement Savings Plan (RRSP) or Registered Retirement Income Fund (RRIF) to one or more of your favourite charities.

This planned gift can be completed in three easy steps:

Step 1: Request an RRSP/RRIF Change in Beneficiary Form from the financial institution that administers your registered plan.

Step 2: Complete the form, naming the charity of your choice as the beneficiary or one of the beneficiaries.

Step 3: Return the completed form to your plan administrator.

Done! It really is that simple.

RRSPs and RRIFs are Smart

Besides being simple and easy, charitable gifts made through your RRSP or RRIF can also be a tax-efficient way to give to the charities of your choice. When it comes to transferring your wealth to the next generation, retirement funds are among your most heavily taxed assets. Upon your death, where a surviving spouse (or eligible dependent child) is not named as beneficiary, the assets remaining in your RRSP/RRIF are deemed to be sold, and 100% of the balance is added to your annual income on your final tax return. The tax liability resulting from this disposition will be borne by your estate. If you earn additional income in the year of your death, these registered assets may well be taxed at the highest marginal tax rate, which, depending on the province in which you live, will be between 45–54%. Since 2000, however, it has been possible to make a direct designation of an RRSP or RRIF plan to a charity, reducing your estate taxes accordingly.

Keep in Mind:

  • Charitable gifts from RRSPs and RRIFs are most appropriate on the death of the second spouse because RRSPs and RRIFs are able to roll over tax-free between spouses.
  • You retain the ownership and use of the plan during your lifetime.
  • The charity must be named as beneficiary on the plan itself.
  • You can contribute a portion or the entire value of the plan to charity.
  • It is important to remember that the total value of your RRSP or RRIF will still be counted as income in the year of your death, but the portion designated for charity will be eligible for a donation tax receipt to reduce taxes owing.
  • Designated proceeds are transferred directly to the charity, thus avoiding probate.
  • The charity issues a donation tax receipt to the estate for the full amount of the contribution.
  • The estate could then claim the gift up to 100% of net income in the final two tax years.