This letter from CRA is a reminder that when leaving funds to a registered charity under a will the drafting is important.

DOCNUM 2007-0259841E5
AUTHOR Maley, Robin
REFDATE 091007
SUBJECT Gift by Will
SECTION 118.1(5)

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu’exact au moment émis, peut ne pas représenter la position actuelle de l’ARC.

PRINCIPAL ISSUES: Whether a gift by will may be claimed in a particular situation, where an individual died and the individual’s will instructed that the residue of the estate be held in trust, with net income to be paid to registered charities.
POSITION: General comments.
REASONS: Reference is made to IT-226R.  No amount will be allowed with respect to a gift by will, within the meaning of subsection 118.1(5), in circumstances where the value of the donation at the time it is made cannot reasonably be determined.

XXXXXXXXXX 2007-025984

October 7, 2009


This is in reply to your letter dated November 7, 2007 in which you pose several questions concerning the application of the Income Tax Act (the “Act”) to a situation where an individual dies, and the individual’s will instructs the trustee to hold and keep invested the residue of the estate in a trust, and to pay the net income in equal shares to named beneficiaries, each of which is a registered charity.  Specifically, you ask whether a separate T3 return must be filed for the estate and for the trust that is established to benefit the charities.  If separate T3 returns are filed, you ask whether the trusts must have the same taxation year.  You also have asked what amounts may be deducted in computing the income of the trust(s).  Finally, you ask whether any amount may be claimed on the T1 return of the deceased in respect of the gift to the charities.

The particular situation outlined in your letter clearly relates to a factual one, involving a specific taxpayer.  As explained in Information Circular 70-6R5, it is not this Directorate’s practice to comment on proposed transactions involving specific taxpayers other than in the form of an Advance Income Tax Ruling request. Where a situation involves a specific taxpayer and a completed transaction, the inquiry should be addressed to the relevant Tax Services Office, together with all relevant facts and documentation.  However, we are prepared to offer the following general comments, which may be of assistance.

A testamentary trust is defined in subsection 108(1) of the Act as a trust or estate which arose on and as a consequence of the death of an individual (subject to the specific exceptions set out in the definition). A trust created pursuant to the terms of an individual’s will is a testamentary trust if it otherwise satisfies the definition in subsection 108(1). It is a question of fact whether the terms of a particular will provide for the creation of a trust. 

Income earned by an estate after the date of death must be reported on a T3 Information Return.  If the terms of a trust were established by the will (or, by a court order in relation to the deceased individual’s estate under provincial or territorial dependant relief or support law), a T3 return would also be required for that trust.  For additional information, you may wish to refer to the CRA’s Guide T4011, “Preparing Returns for Deceased Persons”, which is available on the on the CRA website at

The first taxation year of a testamentary trust begins on the day after the person dies and ends within the next 12 months. There is no requirement that the same taxation year be adopted in circumstances where there is more than one testamentary trust arising as a consequence of a particular individual’s death.  For additional information, reference may be made to the CRA Guide T4013, “T3 Trust Guide”, which is available on the CRA website at 

Pursuant to subsection 104(6), there may be deducted in computing the income of an estate or trust for a taxation year, such amount as the estate or trust claims that would be its income for the year as became payable in the year to a beneficiary. Subsection 104(24) provides that, for the purposes of subsection 104(6),  an amount is deemed not to have become payable to a beneficiary in the year for the purposes of subsection 104(6) unless the amount was actually paid to the beneficiary in the year, or the beneficiary was entitled in the year to enforce payment of it. 

As noted in Interpretation Bulletin IT-286R2, “Trusts – Amounts Payable”, the law provides the executor of an estate with a year (often referred to as the “executor’s year”) to administer an estate, during which time, the beneficiaries of the estate cannot demand the distribution of property held by the executor.  After this time, it is a question of fact as to whether the executor is able to distribute property and whether the income of the estate is payable to a beneficiary. 

IT-286R2 states that, where the initial taxation year of a testamentary trust coincides with the executor’s year and where the sole reason for the rights of a beneficiary being unenforceable is the existence of an executor’s year, the income of the trust for that year will be considered to be payable to the beneficiary or beneficiaries of the trust pursuant to subsection 104(24) provided that none of the beneficiaries object to this treatment.  If there is no designation under subsection 104(13.1), such amounts would be included in the beneficiaries’ incomes for the year pursuant to subsection 104(13).  The estate would pay tax on income that was not payable to a beneficiary. The full text of IT-286R2 is available on the CRA website at

Pursuant to subsection 118.1(5), a gift made by an individual’s will is deemed to have been made, for purposes of subsection 118.1(1), immediately before the individual’s death, and as such, is claimed in the final T1 return of the deceased taxpayer.  For information on gifts made by an individual’s will, we would refer you to the comments in IT-226R, “Gift to a Charity of a Residual Interest in Real Property or an Equitable Interest in a Trust”, which is available on the CRA website at 

As we have discussed with you, the specific will that you have referred to us for comments appears to be silent as to who would be the capital beneficiary of the trust. This raises a number of questions; however, since it is not clear who would receive the capital and at what time, we do not see how any amount could be allowed as a gift by the individual’s will pursuant to subsection 118.1(5).  As noted in paragraph 6 of IT-226R, in cases where the size of a residual or equitable interest at the time of its donation cannot reasonably be determined, no deduction or tax credit in respect of the donation will be allowed.

As stated in paragraph 22 of Information Circular 70-6R5, this opinion is not a ruling and consequently, is not binding on the CRA in respect of any particular situation.

Yours truly,

Robin Maley
for Division Director
International & Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch


Mark Blumberg is a lawyer at Blumberg Segal LLP in Toronto, Ontario.  To find out more about legal services that Blumbergs provides to Canadian charities and non-profits please visit or  Mark can be contacted at or at 416-361-1982.

This article is for information purposes only. It is not intended to be legal advice. You should not act or abstain from acting based upon such information without first consulting a legal professional.