Major changes are coming to Canadian trust/estate rules commencing January 1, 2016

Estates will now be taxed at graduated income tax rates only for the first 36 months after death if the executor or administrator designates the estate as a Graduated Rate Estate (“GRE”). After that point, the estate will have a deemed year end of December 31 and will be taxed at the highest marginal rate on all its taxable income.

All new testamentary trusts (other than GREs) will have a December 31st year end, and existing testamentary trusts will be deemed to have a year end on December 31, 2015 if the death occurred more than 36 months ago.

Due to the extra tax burden arising from the new changes, it may no longer be advisable to create multiple testamentary trusts under wills, as only one GRE is allowed for each deceased taxpayer. There may however still be other reasons for creating testamentary trusts.

If you have a trust or are dealing with an estate, or if you have planned or will be planning your estate, please contact us to find out how these and other changes may affect you.

Source: Accessed September 23, 2015.