Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: Gifts by Will vs Estate
Position: See Document
Reasons: See Document
CALU Annual Conference - 2000
Question 6
Charitable Bequests
Subsection 118.1(5) provides that gifts made by will are deemed to have been made by the deceased immediately before death. On occasion it may be preferable that the estate of the deceased taxpayer be able to claim a donation tax credit rather than having the donation tax credit available to be claimed on the final return of the deceased.
Would the Agency confirm that an individual's estate will be entitled to a donation tax credit under subsection 118.1 where the individual's will provides that:
a) The individual's executors are given the power to make donations, at their discretion, to one or more named charities.
b) The individual's executors are given the power to make donations, at their discretion. No charities are named in the will, but the executors are given the power to determine the charities, based on an "intentions letter" signed by the individual.
c) Specific amounts are to be donated to specified charities, but the executors are given the power to reduce the amounts, as necessary, in the event there are insufficient funds available in the estate to meet all charitable bequests after the payment of all fees and expenses.
Agency's Response:
Whether or not a gift to a registered charity will result in a donation tax credit being available to the deceased pursuant to subsection 118.1(5) or in a donation tax credit being available to the estate of the deceased pursuant to subsection 118.1(3), is a question of fact and depends upon the wording in the deceased taxpayer's will and the discretion given to the executor of the estate with respect to the making of gifts to charity.
(a) If the executor has the discretion to determine whether or not gifts are to be made to charities from the estate, then the gift when made would generally be viewed as having been made by the estate.
(b) The answer is the same as for (a). If the executor has the power to decide whether or not gifts are made, any gift when made would generally be considered to be a gift by the estate.
Follow-up Question: What in the Agency's view would be the effect of an intentions letter?
Response: The effect of using of an "intentions letter" to direct the executor to do something, depends upon its legal effect. If the wording in the will requires the executor to make gifts in "accordance with the intentions letter", and as a result the executor would have a legal obligation under the will to make the gifts, any gift made under such circumstances would generally be a gift by will. If, on the other hand, the will makes no reference to an intentions letter but such a letter is attached to the will, and as a result the executor would have no legal obligation to make gifts, then in our view any gift would generally be a gift made by the estate.
(c) In general, where the will provides for a specified amount to be given to a specified charity, but as a consequence of the payment of liabilities of the deceased and expenses which arose in the administration of the estate, the amount available to be given to the charity is less than the amount specified in the will, it would be our view that there has nevertheless been a gift by will of the actual amount paid.
Follow-up Question: We understand that the Agency is currently reviewing the issue as to whether or not there is a gift by will where the will provides for a specific amount to be given to charity and provides a list of charities to whom gifts should be made, but leaves the executor with the discretion to determine how much of the specific amount each named charity will receive. Can you comment on this?
Response: Yes. The Agency is currently reviewing this issue and other similar gifting issues, and our conclusions will be made public. I expect this to take place over the course of the summer.
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