New rules will come into effect for gifts by Will in 2016. (See September 2014 As a matter of Tax article entitled “New Rules for Estate Donations”.) These measures also included a provision which codified the long-standing administrative practice of the CRA to allow an individual to claim a donation tax credit for gifts made by their spouse.
This prior administrative practice was carried through in respect of gifts by Will of a spouse such that under the prior administrative practice, if a deceased spouse made a gift by Will, the surviving spouse was able to claim the charitable gift arising from a gift by Will of their deceased spouse. This was confirmed in prior CRA commentary. (See November 2010 As a Matter of Tax article entitled “Logistics of charitable gifts made by Will”.)
A recent technical interpretation (#2014-055551 dated January 27, 2015) asked if the prior administrative practice would continue to apply in 2016 when the new estate donation rules come into effect. In essence these new rules deem a gift by Will to be made by the estate of the deceased person when the property that is the subject matter of the gift is transferred to a charity and only if the estate is the “Graduated Rate Estate” (GRE) would there be the ability to carry the donation back to the terminal return of the deceased individual. The current CRA interpretation confirmed that the prior administrative practice would no longer apply and that the new codification does not go as far as the prior administrative practice.
In other words – NO. Where a gift is made by Will it cannot be shared with a spouse. It can only be used by the estate and if it is the GRE then additional flexibility is available to carry it back to the deceased. Starting in 2016, a surviving spouse cannot share the tax credit arising from a gift by Will of their deceased spouse.
(The Tax, Retirement & Estate Planning Services at Manulife writes various publications on an ongoing basis. This team of accountants, lawyers and insurance professionals provides specialized information about legal issues, accounting and life insurance and their link to complex tax and estate planning solutions.
These publications are distributed on the understanding that Manulife is not engaged in rendering legal, accounting or other professional advice. If legal or other expert assistance is required, the service of a competent professional should be sought.
These columns are current as of the time of writing, but are not updated for subsequent changes in legislation unless specifically noted.)
This prior administrative practice was carried through in respect of gifts by Will of a spouse such that under the prior administrative practice, if a deceased spouse made a gift by Will, the surviving spouse was able to claim the charitable gift arising from a gift by Will of their deceased spouse. This was confirmed in prior CRA commentary. (See November 2010 As a Matter of Tax article entitled “Logistics of charitable gifts made by Will”.)
A recent technical interpretation (#2014-055551 dated January 27, 2015) asked if the prior administrative practice would continue to apply in 2016 when the new estate donation rules come into effect. In essence these new rules deem a gift by Will to be made by the estate of the deceased person when the property that is the subject matter of the gift is transferred to a charity and only if the estate is the “Graduated Rate Estate” (GRE) would there be the ability to carry the donation back to the terminal return of the deceased individual. The current CRA interpretation confirmed that the prior administrative practice would no longer apply and that the new codification does not go as far as the prior administrative practice.
In other words – NO. Where a gift is made by Will it cannot be shared with a spouse. It can only be used by the estate and if it is the GRE then additional flexibility is available to carry it back to the deceased. Starting in 2016, a surviving spouse cannot share the tax credit arising from a gift by Will of their deceased spouse.
(The Tax, Retirement & Estate Planning Services at Manulife writes various publications on an ongoing basis. This team of accountants, lawyers and insurance professionals provides specialized information about legal issues, accounting and life insurance and their link to complex tax and estate planning solutions.
These publications are distributed on the understanding that Manulife is not engaged in rendering legal, accounting or other professional advice. If legal or other expert assistance is required, the service of a competent professional should be sought.
These columns are current as of the time of writing, but are not updated for subsequent changes in legislation unless specifically noted.)