Supporting Your Family’s Charitable Giving Aspirations Through Cascading Planning
Just as a river cascades down from its source to its ultimate destination, cascading planning involves a downstream focus, across multiple generations and centred on continuity. This approach to inter-generational planning empowers a family to truly engage in meaningful giving and create a lasting legacy.
Firstly, review who has (and who needs) properly drafted wills. Wills are some of the most, if not the most, important documents we can have, given that they speak for us when we can no longer speak.
All of your adult children need to have up-to-date wills. These wills should not only outline the usual pieces of guardianship and distribution of assets, but also each individual’s charitable giving wishes.
Secondly, review your family’s permanent life insurance strategy.
In the context of cascading planning, once you are clear on your own permanent life insurance needs, the natural evolution is to then consider the needs of future generations. This involves insuring each generation that is alive – grandchildren included.
These policies are normally owned by the family holding company or can be owned personally. There are significant benefits to getting a head start on planning for future generations, with one major benefit being the cost. Given that heirs are younger, the insurance premiums will be much less for the same, or potentially greater, long-term policy values.
In addition to the death benefit, within the policy there is a tax-sheltered investment component called a cash value. During their lifetime, your children and grandchildren can access the cash value at any time for any purpose, including making charitable contributions. Eventually, when they reach their life expectancy, they have these policies to help execute their own estate planning and, again, have the opportunity to use them for meaningful charitable giving.
The giving can be executed through direction in the will and/or by directly naming a charitable organization as a beneficiary of a policy if it is owned personally. A significant donation can be made with the insurance proceeds, which will provide a tax credit that will offset or even eliminate the capital gains tax on the estate.
This helps to ensure that there is continuity of the wealth that you and your family have worked so hard to build, and the legacy that you have created for your family will be stewarded by your grandchildren.