For Canadian residents, Registered Retirement Savings Plans (RRSPs) and Registered Retirement Income Funds (RRIFs) can also be powerful donation tools.
Two ways to Give From Your RRSP or RRIF
- Lifetime RRSP/RRIF gift. Normal lifetime withdrawals from RRSPs or RRIFs can be subject to withholding tax. Withholding tax reduces the funds you would have available to donate and may result in a tax credit that does not offset your tax liability. However, there are ways to receive permission from the CRA to eliminate withholding taxes. This way you can donate 100% of the proceeds and your tax credit will offset 100% of your tax liability.
- Beneficiary Designation or by Will. Many people need their RRSPs/RRIFs during their lifetime, but are able to donate them after their death instead. Income taxes are owed by the estate, plus, there could be three potential unwanted outcomes: funds are subject to creditors, become subject to probate fees, and gifts in the will could be contested by the person's heirs. This can be avoided by naming a charity as a beneficiary of your RRSP or RRIF at your financial institution OR by making a beneficiary declaration in your will and declaring a charity as a beneficiary.
US Resident? See this page to see how to give from your IRA