Under recent changes to the charitable donation rules relating to death, an individual can claim a tax credit for a donation made under the individual’s will or by the individual’s estate in the year of death or the previous year. Alternatively, the estate can claim the credit in the year it actually makes the gift or in any earlier year of the estate. The changes took effect as of the beginning of 2016.
For these purposes, the estate must be a “graduated rate estate”, generally meaning an estate during the first 36 months after death (certain other criteria apply).
Draft amendment released by the Department of Finance on January 15, 2016 will extend the 36-month period to 60 months after death for the purposes of the individual’s credit in the year of death or the preceding year (the estate must still meet the other criteria for a graduated rate estate). This amendment, once enacted, will apply retroactively to the beginning of 2016.
However, the 60-month period will not apply for the purposes of the estate’s credit in a preceding year of the estate. Only a graduated rate estate (first 36 months after death) will be able to claim the credit in a preceding year. However, the Department of Finance is being lobbied on this point, so a change may still be in the works.
A gift made by an estate beyond the 36-month period can still qualify for the estate’s credit in the year of the gift, or can be carried forward 5 years to be used by the estate (assuming it is still in existence).
Also, under the regular donation rules, a gift made by the individual or the individual’s spouse in any of the 5 years preceding death, to the extent they have not been used, can be claimed in the year of death.