NEW TAX RULES FOR ESTATES AND TESTAMENTARY TRUSTS EFFECTIVE JANUARY 1, 2016
One of the main changes eliminates graduated tax rates for estates and testamentary trusts. Indeed, beyond the 36-month period following the date of death, the estates and testamentary trusts concerned will pay tax on all their income at the highest marginal personal tax rate, i.e. 49.97% in Quebec for 2015.
What needs to be done by the end of 2015?
Estates and testamentary trusts established by an individual who died before December 31, 2012 will no longer be eligible for graduated tax rates as of January 1, 2016. Consequently, it may be tax-efficient to wind up such an estate or trust before 2016.
It may also be advantageous to carry out transactions to increase 2015 taxable income and reduce future taxes payable. For example:
- If the estate or trust holds shares in a private company, determine whether dividends should be paid;
- If the estate or trust holds investments (securities) that have accumulated gains, determine whether the gains should be realized.
Other consequences:
- A deemed tax year-end will occur on December 31, 2015;
- From now on, quarterly tax instalments will have to be paid.
Another exception:
A qualifying disability trust (i.e., a testamentary trust with a beneficiary who qualifies for the disability tax credit) will still benefit from graduated rates.
If you have any questions about this tax memo, please contact one of our Canadian tax team members.
| Patrick Beaudet, CPA, CA, M. Fisc. Associate Telephone: 514-878-0278 Email : pbeaudet@demersbeaulne.com |
Sylvain Fontenelle Senior Director Telephone: 514-878-0257 Email : sfontenelle@demersbeaulne.com |
| Francys Brown, Adm. A, LL.M. Fiscal authorities. Associate Telephone: 514-360-7265 Email : fbrown@demersbeaulne.com |
Benoit Malboeuf Senior Director Telephone: 514-878-0270 Email : bmalboeuf@demersbeaulne.com |
| Gil Demers, CPA, CA, M. Fisc. Associate Telephone: 514-878-0291 Email : gdemers@demersbeaulne.com |
Isabelle Gagnon Senior Director Telephone: 514-312-1254 Email : igagnon@demersbeaulne.com |
| Martin Fagnan, CPA, CA, D. Fisc. Associate Telephone: 514-878-6318 Email : mfagnan@demersbeaulne.com |
Gaétan Bisson, CPA, CA, Mr. Tax |
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Liliane Fortier, CPA, CA, LLM. Fiscal authorities. |
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| Jean-Luc Fréchette, CPA, CA Associate Telephone: 514-878-2370 Email : jlfrechette@demersbeaulne.com |
This bulletin summarizes tax developments and planning opportunities. We recommend, however, that you consult an expert before deciding how to apply the suggestions made here, so that you can work with him or her to design a solution that’s right for your particular situation.
