Trust and Estate Filings

Ensuring the accuracy, completeness, and timeliness of Estate and Trust filings is essential in safeguarding your family’s assets.

Testamentary Trust filings

The most prevalent form of a trust is a testamentary trust, which is established through a will and becomes effective following the individual’s passing. All income generated after an individual’s demise is to be reported to the Canada Revenue Agency via a Testamentary Trust Return. This income encompasses:
Workplace

Investment Income

Interest and Dividends

Capital Gain Income

Resulting from the sale of assets like Shares or Property

Rental Income

Generated from real estate owned by the deceased

Business Income

Income earned from businesses posthumously

Annuity Settlements paid to the Estate

Payments paid to Estate after passing (Pension, insurance and other)

CPP Death Benefits

$2,500 payments most Canadian’s Estate receive after death

Workplace

Testamentary trusts can be categorized into three distinct types:

Graduated Rate Estate (GRE)

These trusts are subject to taxation at individual tax rates, remaining effective for a duration of 36 months following the individual’s passing. If all assets are not distributed to beneficiaries within this time frame, any income earned by the estate will be subject to taxation at the highest rate.

Qualified Disability Trust (QDT)

A testamentary trust that qualifies for reduced tax rates, provided the electing beneficiary meets the criteria for the Disability Tax Credit and is the sole beneficiary of the trust. Additionally, the electing beneficiary cannot be a beneficiary of multiple Qualified Disability Trusts.

All Other Testamentary Trusts (OTT)

Effective from January 1, 2016, all income generated within these trusts is subject to taxation at the highest federal tax rate. Consequently, it is advisable to prevent your estate from exceeding the 36-month timeframe to maintain its Graduated Rate Estate classification.

Providing Privacy

Avoiding Compulsory Succession

Multiplying Tax Exemptions

Saving Taxes

Avoiding Probate

Preserving Disability Benefits

Helping a Charitable Cause or Organization

Trust filing services we offer include

Testamentary Trust

A testamentary trust is established through a will and becomes effective upon the passing of the deceased. It dictates how the deceased's assets are allocated.

Alter Ego Trust

This trust permits the individual who created it (settlor) to receive all the income generated by the trust during their lifetime.

Employee Trust

An employer (grantor) sets up this trust, with the employees as designated beneficiaries.

Joint Spousal Trust

In this trust, both the individual who created it (settlor) and their spouse are entitled to receive all trust income during both of their lifetimes.

Lifetime Benefit Trust

This trust serves to support a surviving spouse or dependent who is infirm and was reliant on the deceased. The infirm individual is the sole beneficiary.

Real Estate Investment Trust (REIT)

A REIT functions as a real estate investment vehicle, akin to a mutual fund. It facilitates investments of varying scales, allowing individuals to acquire ownership in real estate ventures through property and mortgages.

Henson Trust

A discretionary trust designed to provide financial support for individuals with disabilities while preserving their eligibility for government assistance programs.

Inter vivos Trust

A trust established during a person's lifetime, used for estate planning and asset protection.

Bare Trust

A trust where the beneficiary has an immediate and absolute right to both the trust's capital and income, with minimal trustee involvement.

The Canada Revenue Agency (CRA) mandates that all income generated within a trust must be reported annually through a T3 filing

Our team is committed to providing you with comprehensive guidance, walking you through the step-by-step process of gathering the necessary information and disclosing it to the CRA. It is essential to note that all trust filings and corresponding amounts owed are to be submitted within 90 days of the trust’s tax year-end.
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FAQ

A trust is a legal entity that holds and manages assets for the benefit of specific individuals or organizations. A trust is either testamentary (created on and as result of someone’s death) or inter vivos (not testamentary). A settlor is the entity that establishes the trust and legally transfers control of an asset to the trust. The trustee is appointed by the settlor to manage the trust assets for its beneficiaries. 

The trustee is responsible for managing and administering the trust or estate’s assets and finances, filing required tax returns, paying taxes and ensuring compliance with tax laws.

A trust/estate has to file a T3 return for a given year if it generates income and has tax payable. It also has to file a T3 return if demanded by the CRA. Other situations necessitating a T3 return include but are not limited to

  • The trust has sold capital property (i.e. principal residence, shares) or has taxable capital gains
  • When a foreign trust is a deemed resident trust in Canada
  • The trust has made a distribution of capital or income to beneficiaries

The deadline for filing trust and estate tax returns in Canada is typically 90 days after the trust’s fiscal year-end. A trust typically has a calendar year-end.

Penalties for late or incorrect filings can include late-filing penalties which are typically 5% of taxes owed and potential legal consequences. It’s crucial to meet filing deadlines and provide accurate information. If the taxes are not paid by the due date, CRA will also impose late-payment interest based on the overdue amounts and the length of time they are outstanding.

Necessary documents may include:

– the decedent’s final personal income tax (T1) return

– a list of assets held by the decedent (and consequently by the estate) at death and their fair market values

– trust document/will

– records of income earned by the trust

– records of distributions made to the beneficiaries

Common types of taxable income for trusts and estates include:

  • interest 
  • dividends
  • taxable capital gains
  • rental income
  • death benefi

Income earned by a trust or estate is typically taxed at the highest marginal personal tax rate. Exception would be for a graduated rate estate (GRE) whose income is taxed at graduated rates (similar to how an individual is taxed). A testamentary trust can only be a GRE for up to 36 months following the death of the individual.

The trust can take an income deduction for distributions of income made to beneficiaries. In that case, the beneficiaries need to report the income distributed on their own tax returns. Other deductions include carrying charges and interest expense (incurred to earn investment income).

Transferring assets to a trust or estate can have tax consequences. The contributor is deemed to have disposed of the asset with accrued gains.

Yes income splitting strategies may be possible, but there are specific rules and restrictions to be aware of. For example, an inter vivos trust can be established by a parent that pays income to their children/grandchildren while they go to school. When structured correctly, the income gets taxed in the hands of the children.

Effective tax planning can help minimize tax liabilities for trusts or estates. Strategies may include income splitting through distribution, qualifying for capital gains exemptions for any real estate disposed of, and the use of tax-efficient investment structures.

How much will it cost for TMP to complete our trust filings?

Basic

Interest and CPP benefit income.

$850 

Expert

Interest, CPP income, distribution of income to 1-3 beneficiaries, 1-5 capital gain disposition and carrying charges

$1,500

Premium

Interest, CPP income, distribution of income to 4-10 beneficiaries, 6-20 capital gain disposition and carrying charges.

$2,500

Custom

Fill in this questionnaire and we’ll get back to you with a quote.

$1,500 +HST

Next Steps

Step 1

Please fill in this questionnaire

Step 2

Schedule a consultation with one of our CPAs to receive a final quote and a checklist of the required data

Step 3

Upload requested data onto cloud folder shared

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212-651-9101
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NY 10022
Toronto King Street West Office
416-333-1116
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Markham Office
905-237-6424
675 Cochrane Dr East Tower 6th Floor, Markham, ON, L3R 0B6
Toronto Bay Street Office
416-333-1116
401 Bay Street, 16th Floor Toronto, ON, M5H 2Y4
San Francisco Office
415-366-5667
590 California Street 16th Floor, San Francisco, CA 94104
New York Office
212-651-9101
555 Madison Ave 5th Floor Manhattan,
NY 10022
Toronto King Street West Office
416-333-1116
100 King Street West, Suite 5600, Toronto, ON, M5X 1C9