Published: March 20, 2020
Last Updated: June 11, 2021
The new rules that come int effect at the end of the year mean that graduated income tax rates for testamentary trusts (trusts set up in a will) end Dec 31 2015. Consider paying dividends & triggering capital gains in the trust prior to that date to take advantage of the graduated tax rates before they are abolished.
"This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in the articles. If you have specific legal questions you should consult a lawyer."
Frequently Asked Questions
A testamentary trust is created as a consequence of an individual’s death. It can either be set up by the will of the individual, or it is created automatically upon death. There are very few tax benefits to testamentary trusts because of deemed dispositions on death and the removal of many special rules in 2016. An experienced tax lawyer can explain the costs and benefits of a testamentary trust set up, or an appropriate living trust alternative for an estate plan.
The principal benefit of a testamentary trust is that it allows you to control how your beneficiaries receive income or capital from your estate over time after your death. This can be especially useful if you are leaving money to a minor, somebody with a disability, or if you want to avoid a beneficiary from recklessly spending money. A legal professional should be consulted when preparing for a testamentary trust.