Canada: Estate and trust tax changes | KPMG | GLOBAL

Canada: Estate and trust tax changes effective 1 January 2016

Canada: Estate and trust tax changes

New tax changes concerning estates and trusts rules will be effective 1 January 2016. These changes may require additional tax compliance measures and the forecasting of cash flows for new tax installment payments starting in 2016.


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Many existing testamentary trusts will be taxed at the top marginal tax rate, rather than at lower graduated tax rates. Estates and testamentary trusts created upon an individual’s death that occurred on or before 31 December 2012 will be taxed at the top marginal tax rate effective 1 January 2016. This means that these estates and trusts may face a federal tax increase of more than $10,000* per year. 

*$ = Canadian dollar


In addition, accrued capital gains of life interest trusts (i.e., spousal, alter ego, and joint partner trusts) will be taxed in the deceased beneficiary’s terminal return instead of in the trust itself.

The new tax rules will also have some potential benefits, as they allow for flexible charitable donation planning—e.g., a charitable donation can be allocated between the deceased and his or her estate in certain circumstances.


Read an October 2015 report prepared by the KPMG member firm in Canada: New Estate Tax Changes — Act Before December 31, 2015

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