All About Estates

Is it really a gift by Will?

Recently a charity contacted me about a long-time supporter who had just died. The late donor intended to make a bequest of valuable artwork, but the gift was not mentioned in her will. The family and executor were willing to donate the art on the condition that the charity provides a receipt to the estate. Should the charity do it?

The short answer is “no”. If a gift is not mentioned in the will, it is not a gift by will. In other words, the decedent is not the donor. The donor will be the estate (with decision made by the estate trustee) or the beneficiaries under the will.

The question arises due to the tax treatment of the gift, so let me be specific about where the tax savings fall. A gift by will is claimed against income on the final two T1 returns per 118.1(5) of the Income Tax Act. The resulting credit may offset up to 100% of net income, which may include the deemed disposition of capital property at death.

A gift by the estate would be claimed on the T3 or estate return. A gift from the beneficiary would be claimed on their own T1 return, long after the estate is settled.

The issue arises with surprising frequency. Charities get pressured to issue receipts. Occasionally charities issue receipts without checking the will. And CRA has been known to accept receipts for gifts not in the will. A bit of clarity helps all involved.

Malcolm is a philanthropic advisor with over 30 years of experience. He is head, philanthropic advisory services at Scotia Wealth Management and founder of Aqueduct Foundation. Views are his own. malcolm.burrows@scotiawealth.com