Child Called Charity

A special idea CSS encourages is to adopt a "Child Called Charity" and gift a child's share of one's estate to several favourite causes. Thus, the donor's favourite charities would receive a share equal to that received by each of the donor's children.

“A Child Called Charity” Example
Rob and Jane Jones

• Age 61 & 62
• Four children
• Committed to several Christian causes
  

Assets:
Total estate:  $500,000    
Including $100,000 in RRSP’s

A. Plan without Charitable Gifts
Income Tax Payable: $50,000   
(approx. _ of RRSP value)
Amount to Charity: $0       
Amount to each child: $112,500   

B. Plan with Child called “Charity”
Income Tax Payable: $0
Amount to Charity: $100,000
Amount to each child: $100,000


SO, HOW DOES THIS WORK?

In the example above we see a couple, Rob and Jane. Jones, with an estate value totalling $500,000 which includes $100,000 in RRSPs. During their lifetimes Rob and Jane were committed to several Christian causes and would like that to continue upon their death.

You will note in A. above, that if Mr. & Mrs. Jones have the RRSP go back into their estate upon their death, they will pay taxes of up to about _ of the value of the RRSP ($50,000). The balance of their estate (approx. $400,000) would then be divided into 4 and each child would then receive one equal share.

In B. above, the example of the “Child called Charity” receiving the RRSP Fund of $100,000,  Mr. & Mrs. Jones are making their favourite charity(ies) the beneficiary of their RRSP. Since this transaction happens outside of the estate, they no longer pay tax on that amount because the charitable gift will offset the tax on income. The end result is that charity receives $100,000 and each child still receives almost as much as they would have received in the first example. 

This option allows:
1). Their children still receive an inheritance,
2). Rob and Jane give a substantial gift to charity.

A win-win situation for all!