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.

Related content

Summary

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 [PDF 80 KB] prepared by the KPMG member firm in Canada: New Estate Tax Changes — Act Before December 31, 2015

The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us

 

Request for proposal

 

Submit

KPMG's new digital platform

KPMG's new digital platform