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: Assuming such planning works for legal purposes under the applicable provincial rules, and that all of the other conditions for a QDT are met, would the CRA agree that the trust created under the terms of the will of the first parent to die can continue to qualify as a QDT after it receives a contribution from the estate of the surviving parent after their death?
Position: Yes.
Reasons: See below.
2026 STEP CRA Roundtable – June 2, 2024
QUESTION 1. Qualified Disability Trusts
To be a qualified disability trust (“QDT”), a number of conditions must be met including that the trust must be a testamentary trust that arose on and as a consequence of a particular individual’s death. It is also the case that only one trust can be a QDT for a particular disabled beneficiary.
Assume divorced parents (and possibly grandparents) would like to contribute to a trust for the benefit of a disabled child and so coordinate their wills so that the first to die creates a trust for the benefit of the disabled child and the surviving parent contributes to the trust from their estate. For example, each will provides that if the deceased is the first to die, the trust is to be created and funded with assets from that deceased’s estate. If the deceased is not the first to die, the will provides that assets are to be contributed to the trust created under the terms of the will of the first to die.
Assuming such planning works for legal purposes under the applicable provincial rules, and that all of the other conditions for a QDT are met, would the CRA agree that the trust created under the terms of the will of the first parent to die can continue to qualify as a QDT after it receives a contribution from the estate of the surviving parent after their death?
CRA Response
Generally, a QDT for a taxation year is a testamentary trust that arose on and as a consequence of the death of a particular individual, that jointly elects, with one or more beneficiaries under the trust, to be a QDT for the year. In addition, several other conditions must be satisfied for a trust to qualify as a QDT.
In particular, subparagraph (a)(i) of the definition of QDT in subsection 122(3) requires that the trust is, at the end of the trust year, a testamentary trust that arose on and as a consequence of a particular individual’s death. The term testamentary trust is defined in subsection 108(1). A testamentary trust means a trust or estate that arose on and as a consequence of the death of an individual, subject to the exclusions set out in paragraphs (a) to (d) of that definition. Paragraph (b) of that definition, applicable to trusts created after November 12, 1981, excludes a trust from the definition of testamentary trust if any property is contributed to it otherwise than by an individual on or after the individual’s death and as a consequence thereof.
A contribution to a trust by an individual on or after the individual’s death and as a consequence thereof does not disqualify a trust as a testamentary trust as defined in subsection 108(1) provided the trust otherwise so qualifies. Paragraph 248(8)(a) treats a transfer, distribution or acquisition of property under or as a consequence of the terms of the will or other testamentary instrument of a taxpayer as a transfer, distribution or acquisition of the property as a consequence of the death of the taxpayer. Therefore, when an individual bequeaths property in their will to an existing testamentary trust, the contribution does not disqualify the existing trust as a testamentary trust because the contribution is made by an individual on or after that individual’s death and as a consequence thereof. As such, in the case where the existing testamentary trust was a QDT, since the contribution does not disqualify the existing trust as a testamentary trust, the contribution will not disqualify the trust from continuing to qualify as a QDT.
As an example, where Parent A is the first to die and a QDT is created under the terms of their will, a subsequent bequest to the QDT pursuant to the terms of Parent B’s will would not disqualify the trust from being a testamentary trust or a QDT since the contribution will be made by an individual on or after that individual’s death and as a consequence thereof. Similarly, if any other individual (e.g., grandparent) bequeaths property in their will to the child’s existing QDT, the contribution would not disqualify the QDT provided the contribution is made by an individual on or after that individual’s death and as a consequence thereof.
However, the question of whether a transfer is made by an individual on or after that individual’s death and as a consequence thereof is a question of fact and law that can only be determined after a review of all the facts and circumstances applicable to a particular situation.
Katie Robinson
2026-109103
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