Types of Planned Gifts to the MMFA

Ms. Cohen is a 72-year-old retiree who has always been passionate about art. For over 40 years, she has been a regular visitor to the Museum, and she would like to make a significant bequest to the MMFA without compromising her financial security during her lifetime.

She has decided to include a donation to the MMFA Foundation in her will, so that her connection to the Museum can be carried on after her death, all while maximizing the tax benefits for her estate.

Selected Option: Donation by will (specific bequest of $100,000 to the MMFA Foundation)

In her will, Ms. Cohen has made a specific bequest of $100,000 to be paid out to the MMFA Foundation upon her death.

• Donation to the MMFA:
  Upon Ms. Cohen’s death, the MMFA will receive $100,000 to support its main priorities.

• Tax benefit for the estate:
  This $100,000 donation will entitle the estate to a tax credit of approximately $50,000,* which could significantly reduce the taxes payable after her death, once she passes away.

Summary:
Thanks to her legacy gift of $100,000, Ms. Cohen will leave a considerable cultural legacy to the MMFA while allowing her estate to benefit from a significant tax credit. She is making this donation without negatively impacting her financial security during her lifetime and still retains the freedom to adjust her will, should her circumstances change.

* The example is based on a 50% tax rate, to simplify the calculation.

Every year, Mr. Dubois loves to take his grandchildren to the Museum. He has always had a strong desire to support the Museum and its activities, but he doesn’t want to negatively impact his current cash flow or deprive his children.

He decides to opt to make a donation through his life insurance policy, naming the MMFA Foundation as the beneficiary—an impactful solution that also offers tax benefits.

Selected Option: Naming the MMFA Foundation as the beneficiary of Mr. Dubois’ life insurance policy

Mr. Dubois takes out a new life insurance policy, naming the MMFA Foundation as the beneficiary, while retaining ownership of his policy. That way, he still owns the policy for his lifetime, and can change beneficiary at any time.

• Investment during his lifetime: Mr. Dubois pays $2,000 in annual premiums for 15 years, for a total of $30,000 during his lifetime.
• Donation to the MMFA Foundation: Upon Mr. Dubois’s death, the MMFA will receive an amount of $200,000, i.e., the amount of the death benefit set out in the terms of his life insurance policy.
• Tax benefit for his estate: His estate will receive a tax receipt for $200,000, which will generate a tax credit of approximately $100,000.*

Summary: For a net cost of only $30,000, Mr. Dubois generates tax savings for his estate of $100,000, while making a major donation of $200,000 to the MMFA Foundation. Plus, since he informed the Foundation of his decision, Mr. Dubois will receive the recognition and gratitude he deserves during his lifetime.

* The example is based on a 50% tax rate to simplify the calculation.

Ms. Rodriguez holds a number of shares that have increased considerably in value over the years. She would like to make a large donation to the MMFA while minimizing the tax burden on her assets. She has decided to donate her shares directly to the MMFA Foundation.

Selected Option: Direct donation of publicly traded securities (shares)

Ms. Rodriguez holds a number of shares that she purchased at a cost of $2,000 and that are now worth $10,000 (fair market value). Instead of selling them (and being taxed on capital gains), she has decided to donate them directly to the MMFA Foundation.

Donation to the MMFA: The Museum receives a donation of $10,000, corresponding to the market value of Ms. Rodriguez’s shares.

• Tax benefit related to the capital gains: Had Ms. Rodriguez sold her shares, she would have realized a capital gain of $8,000 ($10,000 - $8,000). As only 50% of the gain is exposed to tax, the taxable gain would have been $4,000. The taxes owed would therefore be $2,000. Donating these shares directly to the MMFA, completely avoids this tax.
  
  

• Tax benefit related to the donation:
  In addition, Ms. Rodriguez would receive a tax receipt for her $10,000 donation, entitling her to an approximate tax credit of $5,000.*

• Combined tax benefit:
  $2,000 tax savings on the capital gain + $5,000 tax credit for the donation = $ 7,000 total tax savings.

Summary:
By donating her shares worth $10,000 to the MMFA, Ms. Rodriguez incurred a net cost of only $3,000 after tax. Her donation allowed her to make a significant contribution to the Museum, which received the entire donation ($10,000) and recognized her for her generosity.

* The example is based on a 50% tax rate to simplify the calculation.

Mr. Nguyen is about to turn 60. He has an RRSP worth more than he needs for his retirement. He has always enjoyed visiting the MMFA and he would like to leave a meaningful legacy to the Museum, while minimizing the tax burden on his assets. He has decided to name the MMFA Foundation in his will as the beneficiary of a portion of his RRSP.

Selected Option: Naming the MMFA Foundation as the beneficiary of Mr. Nguyen’s RRSP

Mr. Nguyen has named the MMFA Foundation in his will as the beneficiary of a portion of his RRSP.

• Donation to the MMFA: Upon his death, the MMFA will receive the agreed-upon funds directly, in this case, the sum of $50,000 from Mr. Nguyen’s RRSP.
• Tax benefits related to RRSP taxation: Upon his death, the entire value of Mr. Nguyen’s RRSP would have been fully taxable on his final tax return. By naming the MMFA Foundation as the beneficiary of this $50,000 portion of his RRSP, the amount will be tax-free.
• Tax benefits related to the donation: In addition, Mr. Nguyen’s estate will receive a tax receipt for $50,000, which will generate a tax credit of approximately $25,000.*

Summary:
By donating part of his RRSP, Mr. Nguyen not only makes a significant contribution to the MMFA, he also offers his estate a double tax advantage: His estate avoids having to pay tax on the donated portion of the RRSP while benefiting from a significant tax credit.

*The example is based on a 50% tax rate, to simplify the calculation.