How Charities Use Bequest Funds in Canada
People who leave a charitable bequest naturally wonder what becomes of it — whether it disappears into general overhead or actually does the good they intended. The answer depends almost entirely on a choice you make when you write the gift: whether you leave it unrestricted, tie it to a specific program, or endow it. Understanding how charities receive and apply bequests helps you give in a way that can actually be used, rather than creating a well-meaning gift the charity struggles to honour.
This guide follows a bequest from your estate to its use. It is general information, not advice.
How the gift reaches the charity
A charity does not receive your bequest at death — it receives it when your executor reaches the distribution stage, after settling debts and taxes, usually months later. The executor pays the gift and provides documentation the charity uses to issue a tax receipt to your estate, which supports the donation tax credit on your final return.[1] Until then, the charity has no role and no funds.
Unrestricted, designated, or endowed
How you word the gift determines how it can be used:
- Unrestricted — the charity uses it wherever the need is greatest. The most flexible and generally the most useful kind of gift.
- Designated (restricted) — directed to a specific program or purpose. Targeted, but risky if that program no longer exists when you die.
- Endowed — invested as capital, with only the income (or a set percentage) spent each year, creating a perpetual, often named, legacy.[2]
Why unrestricted is usually best
Needs change between the day you write your will and the day the gift arrives, which can be decades. A gift restricted to a program that has since closed, or to a purpose that no longer fits, can become something the charity cannot easily use — occasionally requiring a court application to redirect it. An unrestricted gift lets the charity apply your generosity where it does the most good at the time, which is usually what donors actually intend; see restricted versus unrestricted gifts.
If you want to restrict or endow
Restricting or endowing a gift is entirely legitimate — just make it workable. Discuss any restriction or endowment with the charity in advance so it fits how the organization operates, and have your lawyer word it with enough flexibility (for example, allowing the charity to redirect the gift to a similar purpose if the specific one becomes impractical) that it cannot fail.
Recognition and stewardship
Most charities steward significant bequests — acknowledging the gift, sometimes naming a fund or space, and reporting on its use to the family. If recognition matters to you, or if you would prefer anonymity, say so to the charity or in your wishes; an anonymous bequest is entirely possible.
What we focus on at It's Simple Will
The Will Creator helps you leave a charitable gift and indicate whether it is unrestricted or for a purpose. For a restricted or endowed gift, a brief conversation with the charity and a lawyer ensures it can be honoured. To word the gift, see charitable bequest sample wording.
Related guides
Citations & sources
- [1]Donations and gifts — Prepare tax returns for someone who died — Canada Revenue Agency
- [2]P113 — Gifts and Income Tax — Canada Revenue Agency
Frequently asked questions
How does a charity actually receive my bequest?
Your executor administers your estate, settles debts and taxes, and then pays the bequest to the charity as part of distribution — often with documentation the charity uses to issue a tax receipt to your estate. The charity has no role until the estate reaches the distribution stage, which is usually months after death.
What is an unrestricted gift?
A gift the charity can use wherever it judges the need is greatest — operations, programs, emergencies, or capacity. It is generally the most valuable kind of gift to a charity because it provides flexibility, and it is the simplest to leave because it does not require you to predict the charity's future needs.
What is a designated or restricted gift?
A gift you direct to a specific program, project, or purpose. It lets you target your support, but it carries a risk: if the program no longer exists or the restriction becomes impractical when you die, the gift can be hard for the charity to use. Discuss any restriction with the charity in advance so it remains workable.
What is an endowed gift?
A gift the charity invests as capital, spending only the income (or a set percentage) each year so the gift supports the charity in perpetuity. Endowments create lasting, named legacies but tie up the principal, so they suit larger gifts and donors who want enduring rather than immediate impact.
Why is an unrestricted gift often best?
Because needs change. A gift restricted to a program that has since closed, or to a purpose that no longer fits, can become a problem rather than a help. An unrestricted gift lets the charity direct your generosity to wherever it does the most good at the time, which is usually what donors actually want.
Will the charity recognize or report on my gift?
Most charities steward significant bequests — acknowledging the gift, sometimes naming a fund or space, and reporting on its use to the family if asked. If recognition or anonymity matters to you, raise it with the charity or note it in your wishes; you can also leave a gift anonymously.