Proposed Changes Impacting Charitable Giving

The government tabled a detailed Notice of Ways and Means Motion today to implement a number of changes announced in Budget 2014, as well as other measures. One of these changes will provide greater flexibility with respect to charitable gifts that are made in a will.

Currently, any charitable gifts in an individual's will are deemed to have been made by the individual immediately before they died and the donation tax credits that arise from the charitable gift can be used in the deceased's terminal tax return or the immediately prior tax return. It is not possible for any excess credits to be used by the estate to offset any income that may be earned by the estate.

The proposed changes will provide additional flexibility so that the donation tax credits can be used by the deceased, or by the deceased's estate. The draft legislation provides that for deaths that occur on or after January 1, 2016, the estate will be deemed to have made the charitable gift at the time the property is transferred to the charity, and the donation tax credit can be used by:

• the estate in the taxation year in which the gift is made;
• the estate in an earlier taxation year;
• the estate in the five subsequent taxation years;
• the deceased in the year of death; or
• the deceased in the year prior to the year of death;

In order to benefit from this increased flexibility, the charitable gift must be transferred to the charity within 36 months of the individual's death, which may be difficult in situations where there is ongoing litigation or other issues that delay the administration of the estate.

Overall, these proposed changes are positive as they will provide more flexibility for charitable gift planning in the future.

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