CANADA Law and Practice Contributed by: Ian Hull, Suzana Popovic-Montag and Nick Esterbauer, Hull & Hull LLP
ning is in place to benefit the surviving spouse after death. A surviving common-law spouse may also seek dependant’s support from the deceased’s estate if they satisfy the statutory definition of a dependant. This relief is not restricted to married spouses (see 2.3 Forced Heirship Laws ). For income tax purposes, common-law spouses gen - erally receive the same treatment as married spous - es, including eligibility for spousal rollovers, pension income splitting and RRSP transfers. Making charitable donations can provide considerable benefits to both the charitable cause and the taxpayer. The recipient must be a registered charity in order to receive the desired tax savings. Federal tax credits of 15% are received for the first CAD200 of a donation, and 29% for donations above CAD200. If an individual earns taxable income in excess of CAD246,752, a 33% tax credit may apply to the amount of a donation in excess of CAD200 to the extent that the donor’s taxable income exceeds CAD246,752. It may therefore be more advantageous to carry forward donations to receive higher tax cred - its on amounts exceeding CAD200, particularly if the donor’s taxable income is greater than CAD246,752. Donations may also be eligible for a provincial or ter - ritorial tax credit. Gifting Capital Property Donations to charities need not consist of cash. Capi - tal property is another class of asset that many chari - ties will accept, and it may offer further tax advantages compared with cash donations. When gifting capital property that has increased in val - ue since its acquisition, the taxpayer can receive a tax 10. Charitable Planning 10.1 Charitable Giving
credit for the full market value of the property without paying tax on the related capital gain. For example, if stocks or mutual funds are donated to a registered charity, no tax is payable on the increase in value. 10.2 Common Charitable Structures Gifts Pursuant to a Last Will and Testament Naming a charity as a residuary beneficiary of an estate may complicate the administration thereof. In Ontario, for example, legal proceedings involving a registered charity may necessitate the involvement of the Office of the Public Guardian and Trustee (PGT). The PGT, or the charity itself, may require the estate trustee to apply to pass their accounts with regard to the administration of the estate, and has the right to raise objections regarding how estate assets were managed. The beneficiary of a specific bequest or general legacy typically has no such right, meaning that a specific bequest or a general legacy is a simpler way to benefit a charity while obtaining the related tax benefits. Life Insurance Several options exist for naming a charity as the ben - eficiary of a life insurance policy, with the simplest being to name the charity as the beneficiary of the life insurance policy; this will result in a significant payout. Depending on how the policy is structured, it can be used to provide the individual and/or their estate with significant tax savings. Naming a charity as the ben - eficiary may be suitable if the income tax payable on the terminal tax return is expected to be significant. The life insurance proceeds will not be subjected to income or estate administration taxes. Another option is to name the charity as the irrevoca - ble beneficiary of the insurance policy. In such cases, the taxpayer may receive tax credits for the premi - ums paid into the policy. However, even though the charity will ultimately receive the policy proceeds, the taxpayer’s estate will not receive the benefit from the donation for the amount of the proceeds in addition to the premium contributions.
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