There are many pitfalls to avoid when planning your estate and drafting a Will. In this series of articles, we have highlighted a few of these pitfalls, so that our readers may be better equipped to sidestep them when the time comes to prepare or revise a Will.

Oops! As well known as Greenpeace is, the organization, like other advocacy groups, is not a registered charity in Canada. So…that tax receipt you were planning to get for your charitable bequest and was going to be used to offset the capital gains taxes on your Mayne Island recreational property (remember?), is no longer available. Looks like your grandchildren might not be spending all summer jumping off the dock the way you did when you were a kid.

Tax Deductions for Charitable Giving

In Canada, some types of charitable gifts will give rise to a tax credit in the hands of the donor and some will not.

The Income Tax Act includes a complex set of rules governing when gifts will result in a tax credit. These rules affect all aspects of the charitable gift, including the method, timing, and amount of the gift.

The bottom line is, to qualify as a tax deductible donation, the donor must receive a charitable donation receipt, and this is only possible where a gift is made to a “qualified recipient”. How can you be sure that the entity to which you wish to make a gift is a “qualified recipient”? A good estate lawyer can help in this regard by contacting the organization, ensuring that it is a legal entity, confirming its legal name, and that it has charitable registration status. The prudent lawyer may even obtain written confirmation of its charitable registration number and a copy of the certificate of incorporation.

Consider the case of Van Den Hurk Estate v. British Columbia Rehabilitation Foundation. In this case the donor left a gift “to the GF Strong Rehabilitation Centre at 4255 Laurel, Vancouver, Province Aforesaid, its successors and assigns.” However, the GF Strong Rehabilitation Centre had become the British Columbia Rehabilitation Society and the GF Strong facility was being run by the Vancouver Coastal Health Authority by the time the Will was through probate. The two organizations argued over entitlement to the gift, with the case being decided in favour of the BCR Society because at the time the Will was drawn up, that organization operated out of the Laurel Street address.

It is also worth noting that charitable donation tax credits can also be received for the following:

• donations to registered Canadian amateur athletic associations;
• non-profit organizations set up exclusively to provide low cost housing accommodation for the aged;
• Canadian municipalities;
• the United Nations or an agency of it;
• universities outside Canada if they ordinarily have Canadian students;
• charitable organizations outside of Canada in which Her Majesty in the Right of Canada has made a gift in the year or in the 12 months preceding the year.

The importance of receiving a tax credit is dependent upon the reasons you have for making a donation. Most people give because they want to; they want to make a contribution to their community and they believe in the mission of the charity or the not-for-profit organization. Nonetheless, one can wisely incorporate charitable giving into a comprehensive estate plan in such a manner as to offset other taxes. One example is the capital gains that would be payable on a vacation property that has been handed down through the generations at a time when property values were not as high. Today, when such properties on the West Coast can be worth upwards of $500,000, one must be prepared for the capital gains associated with such properties if the goal is to keep them in the family. Capital gains of approximately 22% will be payable on the increase in value between the time that the testator became the owner and the time of the testator’s death, assuming that the property is not the testator’s principal residence for any of that time.

This is one example of a situation where planned charitable giving, and the associated tax credit, could be used to offset a tax payable. Again, with this and similar scenarios, a good estate planning lawyer can be your best ally.