Loss of a Loved one: Charitable Donation Strategies

Did you know there are several options for claiming charitable donations in the year of death that can help to offset expensive tax on the terminal returns?  Here is a run-down of six of them.

1. Donations in Year of Death.  Claim donations made by the deceased or the spouse/common law partner prior to death in the year of death
2. Donations in Years Prior to Death.   Any unclaimed charitable donations made in the previous 5 years by the deceased or the spouse/common law partner can be claimed on the final tax return.
3. Net income limitation.  In the year of death, there is none – you can claim 100% of net income in the year of death.
4. Excess donations over net income.  In this case, donations can be claimed on optional returns available to be filed at death, or applied to the tax returns in any of the 5 years prior to death.  In the case of ecologically sensitive land donated after February 10, 2014, the carry back is 10 years.
5. Donations made by Will.  If there are directives for donation bequests in the will, the donations are deemed to be made by the estate of the deceased, or in some cases a Graduated Rate Estate (GRE).  The donation is deemed to be made for tax purposes, when the done receives the property. 
6. Donations by the GRE.  A GRE is a type of testamentary trust to which graduated tax rates are applied to taxable income for a period of 36 months.  A designation is required on a T3 return to have this status apply.  In some cases, donations made by the estate that qualifies as a GRE, can be applied to the final T1 return of the deceased.  Where this is possible, donations must be made within 60 months of the date of death.  

Bottom Line:  Strategic philanthropic giving is a conversation most people are interested in having.  Are you taking the time to outline the options to your clients, friends and associated?  Consider taking the designation program that will provide you with the tools to do so:  the MFA-P.