Canada: Bill C-43 Impacts To Charitable Donation Rules

Last Updated: February 8 2016
Article by Pamela L. Cross and Colin Poon

Most Read Contributor in Canada, September 2016

Bill C-43 received Royal Assent in December of 2014, ushering in a new era of estate planning with changes to the Income Tax Act (the "Tax Act"). Included in the bill were changes which have had a significant effect on post mortem planning relating to charitable donations made on death. Generally these rules increase flexibility in respect of plans which utilize charitable donations. However, the new rules had potentially adverse effects on plans utilizing charitable donations and trusts to which an individual can transfer property on a tax-deferred basis such as spousal trusts, alter ego trusts, joint spousal or common law partner trusts (referred to herein as "life interest trusts"). These concerns led to joint submissions being made to the Department of Finance ("Finance") by the Society of Trust and Estate Practitioners (STEP) Canada, the CBA/CPA Canada Joint Committee on Taxation and the Conference for Advanced Life Underwriting (CALU) outlining substantial issues with the new rules. In November of 2015 Finance issued a letter acknowledging the concerns and indicating willingness to work towards a solution.

Finance has recently published legislative proposals (the "proposed amendments") and explanatory notes which address a number of the concerns raised in the joint submissions.

Rules Currently in Force

The rules introduced in Bill C-43 significantly changed the way in which donations on death are treated for tax purposes. Gifts made by the deceased "by Will", designated gifts, and gifts made by an estate are now all deemed to be made by the estate at the time the property is actually transferred to the charity. The value of a gift is determined at the time of the donation and estates can carry-forward any unused charitable donations for 5 years from the date of death.

Special rules now apply to gifts made by estates that qualify as Graduated Rate Estates ("GREs") at the time of the donation. In such cases, the credit can be claimed:

  • by the deceased individual in the year of death or the immediately preceding year,
  • by the GRE in the year of the donation or any prior year of the GRE, or
  • in any of the next 5 tax years of the estate, provided that it remains in existence.

An estate will qualify as a GRE if:

  • no more than 36 months have passed since the date of death,
  • the estate is a testamentary trust under the Tax Act,
  • the estate designates itself as a GRE in its first tax return that ends after 2015,
  • no other estate designates itself as a GRE of the individual, and
  • the deceased individual's SIN is provided.

These rules provide enhanced flexibility to maximize the tax credits available to GREs. Exemptions from capital gains for publicly traded securities also apply to gifts made by GREs, resulting in no deemed disposition immediately before death for such securities provided they are subsequently donated to a qualified donee by the individual's GRE. These rules have created a sense of urgency to ensure all charitable gifts are made within 36 months of the date of death, as this access to increased flexibility is currently lost when GRE status is lost. Fortunately, it appears that this tight timeline has been partially addressed in the proposed amendments, as discussed below.

Although these rules have alleviated the issue of unused tax credits in certain situations, some problems with the new legislation exist. For example, gifts made by a life interest trust can no longer be used to shelter the gain formerly triggered in the trust on the death. This is because Bill C-43 also introduced two important changes: first, a tax year end now occurs in the trust at the end of the date of death of the last surviving life beneficiary of a life interest trust, and second, the tax triggered on the deemed disposition of the trust's assets is shifted from the trust to the estate of the deceased life interest beneficiary (subject to the tax authorities assessing the trust under a joint liability provision). Therefore the taxpayer liable for the tax (the beneficiary of the trust) is not the taxpayer making the donation (the trust itself). Further, as a result of the deemed year end on the date of death of the beneficiary, any charitable donation would be made by the trust in a later taxation year of the trust, and the benefit of the donation cannot be carried back to the year of death.

Fortunately, the mismatches created by these rules are being addressed through a number of proposed legislative amendments.

The Proposed Amendments

Attribution of Income to Deceased Beneficiary of Life Interest Trust

The proposed amendments contain important changes to the provisions which attribute income of a life interest trust to a deceased beneficiary in the above described circumstances. First, subject to a limited exception, the income of the life interest trust (and therefore the associated tax liability) will not be shifted to the estate of the life interest beneficiary. Income (and tax) shifting will only occur in the context of a spousal or common law partner trust that arose on and as a consequence of a death before 2017, in circumstances where the trust and the legal representative of the GRE of the life interest beneficiary (i.e. the spouse or common law partner) jointly elect to have the income (and tax) shifting occur. Where such an election is not made, or any of the other listed conditions are not met, the trust will be liable for the taxes triggered on the deemed disposition.

Carrying Back Charitable Donations in a Life Interest Trust

The proposed amendments also contain provisions which allow charitable donation credits of a life interest trust to be carried back to the previous taxation year in limited circumstances. These amendments, coupled with the elimination of the tax shifting described above, offer a solution to potential mismatches between the tax year in which tax liability arises (the year of death of the last surviving life interest beneficiary) and the next tax year in which the offsetting donation is made.

Under the proposed amendments, a life interest trust would be entitled to carryback a charitable gift to the year of the deemed disposition on the death of the life interest beneficiary (the "particular year"), the gift is made on or before the filing due date of the trust for the particular year and the gifted property was held, or was substituted for property held, prior to the death of the individual which triggered the deemed year-end. Trustees will have a window of time in which they can make charitable donations after the deemed year-end to offset the trust's income for the previous year, which would include any capital gains arising from the deemed disposition of the trust's assets.

Extending Timeline for Making Gifts from a GRE

The new rules providing enhanced flexibility in allocating charitable donations currently apply only to gifts made by a GRE, effectively imposing a 36 month time limit for making charitable gifts out of an estate if flexible allocation is desired. The proposed amendments include changes which would extend the period in which charitable gifts made by an estate would be eligible for flexible allocation to 60 months. This extension will only apply where the estate would otherwise be the GRE of the deceased if not for the 36 month time limit having passed. This extended timeline would also apply to the special rules applicable to gifts of qualified securities, ecological gifts and gifts of cultural property which provide exemptions from capital gains in certain circumstances. Donations made by an individual's former GRE within 60 months of death can be allocated among the taxation year of the estate in which the gift is made or the last two taxation years of the deceased individual (i.e. the year of death and the immediately preceding year). Note that unlike a gift made by a GRE, a gift made between 36 and 60 months of death cannot be carried back to a prior year of the estate or GRE.

The extended timeline for making charitable gifts should alleviate much of the anxiety felt by the estate planning community in regard to the tight timelines which were introduced with the new rules.


The proposed amendments show that Finance has made large strides in remedying the concerns identified by stakeholders. It should be noted the proposed amendments may not be passed in their current form, and Finance is seeking comments on the legislative proposals no later than February 15, 2016. The changes described above may have a significant impact on existing donation planning. Charitable gifting should be reviewed in light of these rules to maximize the available benefits.

About BLG

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.