In general terms, a charitable bequest must be to a registered Canadian charitable organization in order to receive a tax credit in relation thereto. Certain other organizations may also qualify for the tax credit based on specific criteria, such as a sufficient connection to Canada, but confirmation should be obtained beforehand to ensure that the organization to which the bequest is given will qualify for the desired credit.
In most situations, a testator will specify in his or her will which charities are to benefit from the bequests and the amount that is to be given to each organization. Occasionally, however, a testator will provide that his or her trustee is to select the charities. It should be noted that where the testator chooses the charities the tax credit is available in the year of the testator’s death and is applicable to the testator’s terminal return. If the trustee selects the charities then the tax credit is only available to the estate.
A final consideration is ensuring that there is clarity on what is to occur in the event that one or more of the charitable organizations no longer exists at the time the bequest is to occur. If the organization no longer exists and there are no further instructions then the trustee will be forced to apply to the court and request relief pursuant to the doctrine of cy-près. The cy-près doctrine allows the court, when the original objective of a testator becomes impossible, impracticable, or illegal to perform, to amend the terms of the will as closely as possible to the original intention of the testator in order to prevent the trust from failing. The result is that the court will order that the bequest be paid to an organization with objectives as similar as possible to the named defunct organization.
To avoid the possibility that a trustee may have to go to such lengths, a will should invariably address what is to occur to a charitable bequest in the event that the donee organization is no longer in existence at the time of the bequest. A clause can be included which directs that the cy-près doctrine is to apply. Alternatively, the testator can simply provide that in such occurrence the gift fails.
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