CH 8 - Taxation Aspects of Personal Trusts Flashcards
In determining the residency of the trust, the courts often consider these factors: (4)
- residence of the majority of the trustees;
- property location;
- residence(s) of the beneficiaries;
- residence of the settlor.
3 types of testamentary trusts
1- Graduated Rate Estate (GRE) (estate trust
2. Qualified Disability Trust (QDT)
3. Other Testamentary Trust
Uses of Inter Vivos
Trusts (3)
Provide for incapable individuals.
Provide creditor-proofing and reduce probate fees.
Split income with family members.
Tax treatment of revocable trust
income and capital gains derived on the trust property are attributed back to the settlor
21 year deemed disposition rule does not apply to
spousal trusts
The Income Tax Act defines a “preferred beneficiary” as a beneficiary who is a resident in Canada, mentally or physically impaired, entitled to the disability tax credit, and one of the following: (3)
- the settlor, spouse or former spouse (including a common-law spouse);
- the child, grandchild or great-grandchild of the settlor;
- the spouse of the child, grandchild or great-grandchild of the settlor.
The preferred beneficiary election may be useful for physically or mentally impaired beneficiaries who have one or more of the following characteristics: (3)
- low or zero marginal tax rate
- no immediate need for income
- asset management skills that are inferior to those possessed by the trustee
trust income that has not been paid to a minor beneficiary in the year is deemed payable to the minor if: (4)
- the trust is a resident in Canada throughout the year;
- the beneficiary is under 21 years of age at the end of the year;
- the beneficiary’s right to income is vested before the end of the year and did not become vested due to the
exercise or non-exercise of a discretionary power; - is not subject to any future condition other than the condition that the beneficiary survives to an age of not more than 40 years
is a trust a legal entity?
NO
Is at rust required to file separate tax returns?
YES