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Donation Tax Credits for Deaths after January 1, 2016

December 2016

As of January 1, 2016, gifts made in the year of death are considered to be made by the estate of an individual and can be claimed on the deceased’s year of death tax return (“terminal return”) or on their prior year tax return, plus:

1. Gifts made in the year of death by a spouse or common-law partner can be claimed on the deceased’s return, as well as any made in the prior five years that have not been fully utilized. However, gifts made in the year of a spouse’s death, per the will, can no longer be claimed on the surviving spouse’s return.
2. If a donation is made by the estate while the estate is a Graduated Rate Estate (“GRE”), the credit can be claimed on the terminal return or in the return for the immediately preceding year. Alternatively, these donations can be claimed in the estate return in the year of the donation or any preceding year of the estate. The donation credit can be allocated between the individual and the GRE, however desired.
3. These rules also apply when the gift is made by way of a direct designation of a life insurance policy, RRSP, RRIF, or TFSA. Again, the surviving spouse is unable to claim any donations made by the estate on their returns.

Estates qualify as a GRE up to 36 months after the individual’s death. For donations made by the estate, there is an additional 24-month extension to allow the donations to be carried back to the year of death or immediately preceding year. This means that any donations made within 60 months of the date of death will be eligible, provided the estate is a GRE when the donation is made.
Gifts of “qualifying securities” to a charity will result in taxable capital gains of nil (so not included in the donor’s taxable income), while the full fair market value of the gift will be eligible for a charitable donation credit. The term “qualifying securities” includes shares, bonds, and mutual funds listed on a prescribed stock exchange. The same results apply for gifts of cultural or ecological property. Again, the timeline for eligible donations is 60 months, as outlined above.
The term “qualifying securities” includes shares, bonds, and mutual funds listed on a prescribed stock exchange.
For spousal or common-law partner trusts, there is a deemed taxation year end upon the death of the beneficiary. Where charitable gifts are made by this type of trust after the deemed year end, the trust can claim the donation in the deemed taxation year or in the following five years, provided the donations are made before the filing due date of the return. The filing due date of the return will be 90 days after the deemed year end of the trust.

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