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Philanthropy, Tax and Testamentary Wishes Part 2


​​The previous article discussed comprehensive planning with respect to charitable donations or establishing a private foundation was done while the donor is alive. Quite often however, the donor wishes to make their charitable donations through their will because of the deemed disposition and taxation issues that arise on death. In some cases, the donor wishes to make their charitable donations through their will because of the deemed disposition and taxation issues that arise on death. Under the Income Tax Act, individuals are considered to sell at fair market value, all of the property that they own immediately prior to their death. This results in income tax being levied on all accrued capital gains, realization of all undrawn amounts in RSPs or RIFs and untaxed income in the individual’s final tax return.  Where an individual has a surviving spouse, the deemed disposition and taxation rules can been deferred on property transferred to that spouse. Where there is no surviving spouse, the potential tax, particularly where the individual has been carrying on business through a private family corporation can be significant.

Charitable donations made according to the last will and testament of a donor come with their own set of unique complexities. One difference from the rules for donations during one’s lifetime is that the 75 per cent of income limitation for donations is removed. Donations can be made and eligible for credit up to 100 per cent of income in the year of death. Furthermore, if a large donation is made in the year of death or through the will (a testamentary bequest), the donation credit can be used against taxes payable in the year of death, in the taxation year prior to the year of the death, in the estate created by the deceased following the year of death or in any of the next five years by the estate. Considerable flexibility under the terms of the donor’s will and significant planning on behalf of the donor and his personal representatives (executors) will be required to meet both the desire to make testamentary charitable bequests while also achieving the goal of mitigating taxes arising on death.

Achieving success in business is hard work. After all the sacrifice, risk and commitment what’s next? How do you secure your business, exit on your own terms and design the future your way? Thoughtful succession planning is a critical part of the future success of any business and family legacy, but focusing on day-to-day operations can make it difficult to sit down and engage in the planning process. Business—like life—is risky enough without taking unnecessary chances. You need to be prepared and that means developing a proper succession plan now, so it’ll be there when you need it most. MNP’s comprehensive succession program that accounts for every aspect of the process. By focusing on the S.M.A.R.T. factors (Succession, Maximizing value, Asset and wealth management, Retirement needs and Tax planning), we help ensure every step of the exit planning  process is considered, leaving nothing to chance.

For more information, contact Graham Heron, FCPA, FCA at 403.346.8878 or [email protected]

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