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Originally Posted by CliffFletcher
I understand this is probably the best approach financially. But as the person holding enduring power of attorney for both my parents (my dad is in a care home), I’m concerned about the ethical and legal considerations of drawing tens of thousands of dollars out of my mom’s financial assets and gifting it to me and my sister. My parents don’t have the capacity to make financial decisions of their own, so they can’t really give consent.
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Ask each other, "What would our parent's intentions be?" (better yet, ask them if you are able to). If the intention would have been to benefit the kids and not the government, and there's no legal issues then I don't see a problem. I'm not saying just cut a cheque. I'm saying talk to a lawyer vs never knowing the real rules. This is especially important to ask if one of the beneficiaries is struggling financially and the parents have free cash flow.
I know someone who was like this and in deep financial distress due to a divorce. They too said, "Unsure ethics." so I told them to understand the issue instead of never exploring it. They got the lawyers to draft up everything and formalize it (vs just cutting cheques as POA), but they finally did. Lawyer said their situation was OK.
Basically, it just circles back if you are doing something that if the parents wouldn't hesitate to do, then I don't think it's an ethical issue at all. I absolutely understand not wanting to do it at all if there's no need for the money, but if one of the beneficiaries has financial struggles and there's going to be unanimously no issues at all for doing this (ie: no beneficiary discontent), consider it and talk to a lawyer.
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Originally Posted by Fighting Banana Slug
Thanks to the SME's out there, this has been really informative.
Quick question: on a terminal return, a charitable donation via the will would create a tax credit, correct? My dad wants to make a fairly sizable gift to a museum and I thought it might be better to do it while he is alive, but he really wants to amend the will. I don't really care either way, but want to make sure the basic tax rules would apply.
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Donation of cash or art? Cash is straight forward, art is a clusterF, especially with finding someone third party to appraise its FMV to CRA's satisfaction. Donations (less advantage) create a non-refundable tax credit, yes.
Overly simplified, but on a terminal return, special rules for donations for limits and usage, but overall still basically same mechanics as donations for a living person. If there's excess donations that can't be used up, there's seepage (government wins).
If cash, just tell dad to save the $500 amendment fees (or whatever the cost) and just donate $500 more to the museum instead. Perhaps ask him if he wants to benefit the museum, lawyers or the beneficiaries more. You don't care either way.
If art, then I understand the concept of putting it in the will, but make sure the beneficiary (ie: Museum) even wants the art. I've seen this happen and create a limbo situation.
I've told people that beneficiaries aren't just kids and friends. It can be charities near and dear to your heart as well.
I agree with you that if dad is just spending a few hundred to donate a few thousand in cash to a museum later on... that's wasteful and do it while alive. But if it's a slightly more complicated situation or a non-monetary/stock donation, I sorta understand the reasoning to include it on the will, but I'd still try not to do it. I've seen a multi-millionaire give gifts of like $500-1000 to like a dozen friends upon death. Half of them were already dead. Luckily, the executor knew all of the families and it didn't turn into a nightmare to fulfill.