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Donations of RRSPs or RIFFs

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Large portions of many Canadians' estates are made up of RRSPs or RRIFs. These registered plans deserve special attention when considering a charitable gift. To understand both the potential benefits and pitfalls of making a gift using RRSP or RRIF funds, it is necessary to have a basic understanding of the tax treatment given to these plans on death.

You may donate all of a portion of your RRSP or RRIF and receive a tax receipt for the full amount of your donation. Contributions to an RRSP are tax deductible and the assets in the plan grow on a tax free basis, however as funds are withdrawn from the plan they are taxed. This makes gifts during your lifetime not particularly tax effective, unless you must make mandatory withdrawals from your RRIF. If you gift funds from your RRSP at age 69 or earlier, you can obtain a waiver from Canada Revenue Agency to avoid the withholding tax.

After death the full fair market value is usually included in a person's income and subject to tax, unless the beneficiary is your spouse or dependent children. Your tax advisor can provide more information if this is the case. This can result in a significant amount of tax on the value of your RRSP/RRIF, this can be offset by tax credits created by making a donation to the LCF. Designating the Foundation as the beneficiary in your will can be very valuable, as the charitable tax receipt issued to your estate will help to offset the tax that will otherwise be payable by the estate.

In your will you may name the Lethbridge Community Foundation as the designated beneficiary of the RRSP/RRIF in the plan documents, OR name your estate as the designated beneficiary of the RRSP/RRIF plan and include a gift to the Edmonton Community Foundation in your will.

Consult your professional advisors so that your gift takes into account your overall estate and tax planning considerations. If you wish to proceed, have your advisor change the designated beneficiary of your RRSP/RRIF to either the Lethbridge Community Foundation or to your estate [in which case you will also need to have your lawyer change your will to include a gift to the Lethbridge Community Foundation]. Upon death, the Foundation will receive the gift and issue a charitable tax receipt to your estate.

The LCF will be pleased to work with you to put a fund agreement in place that will ensure your wishes are carried out after the gift is received. The Lethbridge Community Foundation encourages prospective donors who are interested in this type of gift to discuss the financial implications with their financial advisor.