Graduated Rate Estate (1)
- 3 years from DoD
Qualified Disability Trust (3)
- established via a will
- bene agrees only one QDT per bene while they receive DTC
- graduated rate tax
Testamentary Spousal Trust (Qualified) (8)
- established via will
- assets must vest indefeasibly w/in 36mo
- spouse ONLY ONE to receive income/capital during lifetime
- rollover possible
- top MTR
- at spouse’s death, deemed year-end and disposition; income attributed to spouse (life tenant)
- life tenant is responsible for tax first, then trust liable if still outstanding
- no 21-year rule until spouse/bene’s death
Testamentary NonSpousal Trust (Non-Qualified/Tainted) (7)
- established via will
- for minor, disabled, parent, cottage, etc
- no rollover
- top MTR
- income paid to bene(s) retains its character
- 21-year rule
- fixed interest (specific rules) vs discretionary (trustee’s judgement)
Inter Vivos Living/Family Trust (7)
- settlor often is trustee & beneficiary is family; can give instructions for after settlor’s death
- usually revocable - if so, all income/gains taxed to settlor
- top MTR
- if settlor is one of the discretionary capital benes, tax-free rollout of capital to settlor only
- attribution still applies for minor bene income
- 21 year rule
- no probate - privacy, no delay, no fees, less litigation
Spousal/CL Partner Trust (5)
- settlor establishes for spouse
- spouse is ONLY beneficiary during their lifetime
- tax-free rollover; no attribution to settlor (?)
- top MTR
- after spouse’s death, 21 year rule begins
Alter Ego Trust (6)
- settlor is 65+
- settlor is beneficiary
- tax-free rollover (attribution takes precedence) (?)
- at settlor’s death, deemed year-end and disposition; income attributed to settlor (life tenant)
- life tenant is responsible for tax first, then trust liable if still outstanding
- after settlor’s death, 21 year rule begins
Joint Partner Trust (6)
- settlor is 65+
- settlor and spouse are benes
- tax-free rollover (attribution takes precedence) (?)
- at 2nd death, deemed year-end and disposition; income attributed to 2nd life tenant
- 2nd life tenant is responsible for tax first, then trust liable if still outstanding (ie 2nd LT’s bene’s via will could suffer tax costs for 1st LT’s benes’ assets w/in trust)
- after 2nd spouse’s death, 21 year rule begins
Revocable Trust (2)
if settlor is one of the discretionary capital benes, then
- all income and gains taxed to settlor (ie graduated rates)
- tax-free rollout of capital to settlor only
Irrevocable Trust (3)
- no attribution to settlor
- top MTR or low through to benes
- 21 year rule
Henson Trust (Testamentary or Inter Vivos) (4)
- if trustee = bene then NOT QDT
- trustee must have absolute discretion
- can be funded with life insurance proceeds
- can usually proceed without impacting provincial disability benefits
Trusts Generally (3)
- income paid out retains its character for tax in bene’s hands
- any non-taxable portion or any after-tax income in the trust = trust capital - can be paid tax-free to bene’s
- trustees and options to change/add is outlined in establishing document
Deemed Disposition for AET, JPT, QST
Beginning in 2016, three new rules will take effect. First, the death of the alter‐ego, or partner/spouse will trigger a deemed year-end for the trust. The trust will then have 90 days to file its tax return. Second, the income for the stub‐period up to the death along with the capital gain arising on the deemed sale will be attributed to the life tenant (i.e., the settlor of an alter‐ego trust, the second partner to die in a joint partner trust or the spouse in a spousal trust). Finally, there is joint and several tax liability between the trust and the life tenant. However, the assets of the life tenant must be exhausted before the government can go after the trust for the tax.
https://www.wagnersidlofsky.com/new-tax-changes-to-canadian-trust-rules-means-its-time-to-revisit-your-estate-planning/
