The executor of a will should have more flexibility in claiming charitable donations on an estate’s tax return if changes proposed in the 2014 federal budget become law.
Currently, charitable donations that are eligible for the charitable donations tax credit (CDTC) that are made upon a person’s death at the direction of a person’s will or a beneficiary designation are treated as a gift made prior to the individual’s passing. But this year’s budget, released on Tuesday, proposes to change this rule so that a charitable donation made after an individual’s death will be attributed to the estate rather than the deceased.
“This is a positive change that grants additional flexibility to estate trustees when it comes to gifts made via the will or beneficiary designation,” says Jaime Golombek, managing director of tax and estate planning with Canadian Imperial Bank of Commerce’s private wealth-management division.
If the proposals are accepted, estate trustees will have the flexibility as to when to claim the charitable donation for the estate. For example, the claim could be made in the year in which the estate makes the donation, an earlier taxation year of the estate or the last two taxation years of the individual. To qualify, the donation must be made within the first 36 months following an individual’s death.
The current limits on how many charitable donations can be applied in a year will continue. Budget documents state that the new rules will be applicable to 2016 and subsequent taxation years.