How can saving for my retirement benefit a charitable organization like the McGill University Health Centre Foundation?
The benefit comes if you pass away while you still have retirement savings and in your will you’ve gifted those savings to the charity of your choice. If that’s the case, your estate will receive a charitable donation receipt, at which time your RRSPs or RRIFs will effectively pass to the charity free of tax. This is because in the year of death and the year preceding death, you’re allowed to claim a tax credit for donations to a registered charity that are up to 100% of your income, which offsets the taxes your estate would have to pay due to your savings being “cashed out” upon your death (while alive this tax credit is limited to 75% of any given year’s income). If you don’t gift your registered retirement savings plans (RRSPs, LIRAs, RRIFs and LIFs) to a charity, they will become fully taxable at death, often at the highest marginal tax rate, which is 48.22 percent in Quebec (unless you’ve willed them to your surviving spouse). For example, a $100,000 RRSP or RRIF would see $48,220
