GIFTS OF RESIDUAL
INTERESTS
Living in your principal residence or enjoying property such as a
cottage can be all the more satisfying if you know that, when you no longer
need your real estate, it can become your gift to the Anglican Church of Canada
for its mission, ministry and programme—through your parish, the Diocese of
Edmonton, General Synod, the Anglican Foundation of Canada, The Primate’s World
Relief and Development Fund, the Indigenous Healing Fund, or a theological
college.
Introduction
It is like having
your cake and eating it, too! You have the satisfaction of making a major gift
to the Diocese of Edmonton now and receiving an immediate tax
benefit, yet you continue to use and enjoy the gift property for the rest of
your life!
It is known as a “gift
of residual interest” with retained life use, and it usually involves your
principal residence or other personal use real estate, such as a cottage. In
making such a gift, you transfer the property irrevocably to the Diocese of
Edmonton but retain its lifetime use. If you wish, the arrangement can include use
of property for your spouse’s life.
When the transfer
is made, you will receive a donation receipt for the present value of the “residual
interest”—the value, in today's dollars, of the property the Church will
receive at your death. This is calculated on the basis of the property’s
appraised value, your age, and an appropriate discount rate.
Giving Your Principal Residence
Elise C., age 72, owns a house valued at $300,000.
She wants to continue living in it for many years to come, but she would like
the Diocese of Edmonton to have it
at the end of her life. She decides to give the home to the Diocese now,
retaining a life interest for herself. She receives a donation receipt for $128,131
which, assuming a 50 percent combined tax credit, will reduce her income taxes
by $64,066 over the next five years. (The portion of the donation receipt that
she may claim in any year is limited to 75 percent of her income, but she has
the gift year and five additional years to use the full amount.)
Because Elise’s
house is her principal residence, she realizes no taxable gain at the time of
the transfer, no matter how much its value has increased since she acquired it.
During her continued occupancy, she will be responsible for maintenance and
such other expenses as are specified in her gift agreement with the Diocese. If
it becomes necessary for her to give up the house sometime before her death,
she has several options. She may rent the house and retain the rental income,
give her life interest to the Diocese and receive an additional donation
receipt, or, by agreement with the Diocese, sell the house and receive a share
of the proceeds based on the value of her life interest.
Giving Other Types of Real Estate
It is easy to see
how a residual interest in a personal residence can be an appropriate gift, but
other property you own and use may also be a likely candidate. In this case,
you will be taxed on 50 percent of the capital gain attributable to the
residual interest, but the tax savings from the donation receipt will always
more than offset the tax on the gain.
Harvey M., age 73, has a cottage on a lake a
few hours from his home in
When you give
property that has appreciated in value, the amount of the donation receipt
creditable in any one year is 100 percent of the taxable gain in the gift, plus
75 percent of your other income. This assures that you will always realize net
tax savings, no matter how much the property has appreciated.
Note: With real
estate held solely for investment purposes, it generally makes more sense to
contribute the residual interest by means of a charitable remainder trust.
If you would like more information, in confidence and without obligation,
please complete the Request
for Planned Giving Information form.