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Estate Planning and Trusts
Budget 2016 and Charitable Giving: Where are we now?
Name: Troy McEachren
Company: Miller Thomson LLP
Tuesday, April 4, 2017
2
Overview
> Charitable Giving
> 2016 Federal Budget – Income Tax Measures
> CRA Charities Directorate Report on the Charities
Program 2015-2016
3
Forms of Testamentary Charitable Gifts
> Legacy
> Residual heir
> Conditional heir ("family demise")
> Charitable remainder trust
> Designated beneficiary of RRSP, RRIF, TFSA or
insurance policy
4
Forms of Testamentary Charitable Gifts (cont’d)
Charitable Remainder Trusts
> Charity is capital beneficiary of trust
> Charitable receipt/credits permitted at time trust
settled, but only if trust irrevocable and no capital
encroachments
> Charitable receipt/credits permitted at termination of
trust only if charity not a beneficiary and if trustees
have discretion to make gifts.
5
Taxation on Death
> Deemed disposition on death – capital gains tax
> Taxation on income
> RRSP and RIFF
6
Gift by Will – Pre-January 1, 2016
> 118.1(5) Gift deemed to be made immediately before
donor’s death> Specific amount/specific property
> Specific percentage/share of succession
> Quantifiable
> Liquidators could have some discretion
> Tax credits can only be claimed against deceased’s
income in year of death or year prior
> Valuation of non-cash gifts starts at fair market value
at date of gift
7
Gifts by Will – Pre-January 1, 2016
> If liquidator has too much discretion, the CRA
considered the gift was made by the succession
> Donation tax credits could only be used by the
succession for any of the five following years + year
of gift
8
Gifts by Will – Post December 31, 2015
> New rules for gifts by will> Donor: succession
> Value of non-cash gift; at time property actually transferred to charity
> GRE:
> 36 months of death
> Assets owned by deceased at death
> Receipt can be used
> Any year of GRE (3years) – 75%
> Deceased’s terminal return – 100%
> Tax year immediately preceding year of death – 100%
9
Gifts by Will – Post-December 31, 2015
> Non-GRE: can use receipt in year of donation or any
5 following years
> Gifts of publicly listed shares, cultural property, and
ecological property qualify from no capital gains
inclusion only if made from a GRE
10
January 15, 2016 – Legislative Proposals
> Extends time from donation if made from GRE – 60
months
> Receipt can be used> Any time during 60 months after death – 75%
> Deceased’s terminal return – 100%
> Tax year immediately preceeding year of death – 100%
11
Gifts by Will – Post-January 15, 2016
> Pros: > Greater flexibility for use of receipt
> Less risk for poor drafting
> Benefit from increase in value of gift over 60 month period
> Cons:> Loss of benefit if delay in transfer (clearance certificate, litigation, private
company shares)
> Possible mismatch of tax liability vs. Credit
> Liquidity: must pay tax prior to receipt of receipt
> Charitable remainder trusts might no longer work
12
Donations from Certains Trusts – Post January 1, 2016
> New rules apply as of January 1, 2016 where
deemed disposition on death of beneficiary> Spousal trust
> Alter-ego trusts
> Joint spousal trust
> Self-benefit trusts
13
Donations from Certains Trusts – Post January 1, 2016
> Gains on deemed disposition taxed in trust
> If gift made from trust with 90 days after the end of
year when beneficiary dies can use receipt against
deemed disposition
> Can carry-forward 5 years if trust continues
> Requires a "gift" from trust
14
Budget 2016: Gains Not Exempt
> Budget 2015:> Proposed to exempt gains on sale of real estate and private company
shares when proceeds donated within 30 days
> Budget 2016> Rejected the proposal
> Budget 2017