Revisiting The "new" Testamentary Donation Rules

The legal landscape for testamentary charitable gifts underwent a significant sea-change in 2015. In that year, amendments to the Income Tax Act (Canada), R.S.C. 1985, c.1 (5th Supp.) ("Tax Act") were implemented that apply to deaths occurring on or after January 1, 2016.

Under what we now call the "old rules" – which applied to deaths occurring prior to January 1, 2016 – the Tax Act deemed a testamentary charitable gift made by will to have been made by the deceased taxpayer immediately before death, and the gift was valued as of the date of death. Since the gift was deemed to have been made immediately before death, the donation tax credits arising from the gift could be used to reduce or eliminate the deceased taxpayer's tax liability on their terminal tax return. The Tax Act also permitted the donation tax credit to be applied to the year immediately preceding the year of death.