CRA confirms that the 21-year rule’s application to testamentary trusts is almost always computed from the testator’s date of death

CRA considers most testamentary trusts to arise on the date of death of the testator, so that the 21-year rule generally is computed from that date.

Unusually, the creation date of the testamentary trust might not be concurrent with the testator’s date of death - for example, the will provides that, on the date of the death of the first-generation beneficiaries, such as the spouse, the trustee is to divide the remaining property into equal parts and hold each portion in a new trust for each of the testator’s children. In that situation, the latter trust may be viewed as being created some time after the testator’s date of death. However, the deemed disposition date of those new trusts would still be based on the testator’s date of death because of the rule in s. 104(5.8), which was described as intended to prevent any restarting of the 21-year clock through trust-to-trust transfers.

Neal Armstrong. Summary of 2018 STEP Roundtable, Q.2 under s. 104(4)(b).