Leaving money to charity and want to make changes? Part 2

Our reader wants to make a charitable gift of $50,000; but recall that because of the fluctuating values of your RRIF, TFSA or life insurance policy, you will have to indicate a percentage — not a dollar figure. Let’s look at how best to determine, and manage, that percentage.

The percentage allocation to your charity is based on the current market value of your chosen account. Suppose that of these three accounts, your TFSA is the largest and currently sits at $125,000. A $50,000 gift equals 40 per cent, which is what you will allocate to your charity on the change of beneficiary form. Because you have numerous beneficiaries outside of your charitable interests, just indicate your “estate” as the beneficiary for the remaining 60 per cent.

But beware: it’s certainly likely the value of the assets in any of these accounts will change by the day, based on the performance of the investments held in each account.

Let’s return to the example of your TFSA worth $125,000 today, 40 per cent of which you are gifting to charity. If the value of your TFSA is $126,000 or $124,000 tomorrow, then the dollar figure of the gift may change slightly (i.e., 40 per cent of $126,000 is $50,400 and 40 per cent of $124,000 is $49,600). You can probably live with these minor fluctuations in the amount eventually gifted to your charity. But what happens when account values vary more drastically?

For example, your TFSA may increase each year as you continue to make contributions (the annual limit is currently set at $6,500 for 2023 and $7,000 for 2024). Your RRIF will likely decrease each year, as you are required to withdraw the minimum annual amount. Finally, the death benefit of your life insurance may change each year based on investments associated with the policy or dividends paid.

Fortunately, all these fluctuations can be accommodated in your charitable beneficiary strategy. You can review the value of the account annually to ensure the allocated percentage closely reflects the $50,000 gift you want to leave to charity.

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• Dec 31, 1969
• Comments

• Dec 31, 1969
• Comments

For example, let’s presume next year your TFSA jumps in value to $140,000, after you have maximized your annual contribution and the investments have increased in value. Your 40 per cent gift to charity now equates to $56,000. If this is agreeable to you, then leave well enough alone and review the account value and dollar figure of your charitable gift again next year. But if you prefer to keep the gift closer to the original intended amount of $50,000, then simply complete a new change of beneficiary form and amend the percentage accordingly.

In my example, you would change the percentage downward to 36 per cent (i.e., 36 per cent of $140,000 equals $50,400, which is closer to your target gift of $50,000). Each year, you can amend the percentage accordingly.

One caveat: you must be mentally competent to make changes (whether charity name or percentage) to your beneficiary designations, but that applies to any changes in a legal will, too.

With this strategy, you can easily and regularly review both the charity of choice and the percentage allocation to be sure they reflect your current wishes — and all without making costly visits to your lawyer.