Until recently, where an individual designated a charity as a beneficiary under the individuals RRSP or RRIF, the gift to the charity upon the individuals death did not qualify for the charitable tax credit. The credit upon death was formerly available only with the respect to donations that were made under the deceased’s will and direct designations under RRSPs and RRIFs did not meet this requirement.

Fortunately, the government has changed the rules, and the tax credit is now available for gifts of RRSP and RRIF proceeds to charities that are made under a direct designation under an RRSP or RRIF. As a result, the credit in these circumstances will be available in the year of death or in the preceding year, as described above. These changes apply to deaths occurring after 1998.

The amount of the donation for these purposes will generally be the fair market value of the gift from the RRSP or RRIF, determined as of the time of the deceased’s death. The gift must actually be made to the charity within 36 months of the death, although the CCRA has the discretion to extend this period further. Note that a similar new rule will allow the charitable tax credit where the deceased designated a charity as a direct beneficiary under a life insurance policy. If you are looking for ways to plan your estate, leave the non taxable assets to the family, and the taxable assets, such as RRSPs and RRIFs to a charity. This may maximize your estate, however, professional advice should always be considered when planning your estate.