Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: Timing of the creation of a testamentary trust
Position: Question of fact, depends on the terms of the trust. The estate of the deceased and other trusts funded out of the residue of the estate will generally be testamentary trusts
Reasons: General comments provided - including comments from Assessing
STEP CRA Roundtable June 2012
Suppose that under the terms of a taxpayer's Will, an estate is created and the estate trustees are instructed under the Will to set up a number of trusts from the residue of the estate. As a practical matter, it takes a period of time for the estate to be administered and for these testamentary trusts to be funded.
Do these trusts exist at the date of death even though they may not, at that time, actually have title to any assets (since the assets are in the name of the estate which is under administration)? If these trusts do exist as at the date of death, how does one file a tax return for these trusts? If so, what is to be included?
On the other hand, if these trusts do not exist until they are funded, when are they created and what taxation year would they have (is it the same as the year-end of the estate or can any taxation year be selected)?
A testamentary trust is defined in subsection 108(1) as a trust or estate that arose on and as a consequence of the death of an individual, subject to certain conditions. Consequently, the estate of the deceased and other trusts funded out of the residue of the estate will generally be testamentary trusts. Traditionally, the CRA has not attributed any tax consequences to the transition from estate administration to trust administration and generally has viewed the trusts created out of the residue as arising on death.
Our colleagues in T3 Assessing advise that in practice each trust created out of the estate residue is given the same commencement date and taxation year end date as the estate. In circumstances where more than one trust is created out of the residue, a separate T3 trust number is assigned to each trust. It is of course always possible to request a change of fiscal period as set out in subsection 249.1(7).
June 12, 2012
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