Estate Planning and Trusts

Budget 2016 and Charitable Giving: Where are we now?

Name: Troy McEachren

Company: Miller Thomson LLP

Tuesday, April 4, 2017

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Overview

> Charitable Giving

> 2016 Federal Budget – Income Tax Measures

> CRA Charities Directorate Report on the Charities

Program 2015-2016

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Forms of Testamentary Charitable Gifts

> Legacy

> Residual heir

> Conditional heir ("family demise")

> Charitable remainder trust

> Designated beneficiary of RRSP, RRIF, TFSA or

insurance policy

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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.

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Taxation on Death

> Deemed disposition on death – capital gains tax

> Taxation on income

> RRSP and RIFF

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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

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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

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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%

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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

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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%

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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

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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

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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

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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