Multiple Trusts

Testamentary Trusts (defined HERE) like spousal trusts and trusts for the deceased's children are taxed at graduated tax rates - the same as individuals when they file their personal income tax returns. Inter Vivos Trusts (defined HERE) like Family Trusts created by a living person, on the other hand, are taxed at the highest individual tax rate, negating some of the tax benefits of having this type of trust. 

Creating multiple testamentary trusts for separate beneficiaries on death can save significant tax dollars though multiple use of the graduated tax rates. CRA has rules to prevent multiple trusts being created solely for income splitting tax benefits of the multiple graduated tax rates. The Income Tax Act notes that where substantially all (90% or more according to CRA) of the property of two or more trusts has been received from a single individual and the income from the trusts will ultimately accrue to the same beneficiary or group of beneficiaries, CRA will designate all of the trusts as a single trust. It is therefore important that an individual provide for in his will to create a single and separate trust for each beneficiary and not separate trusts which include groups of beneficiaries or multiple trusts for a single beneficiary. 

Proper planning with your Chartered Accountant is necessary. Contact Keith Anderson CA at (780) 447-5830 if you need advice. 

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