While the challenges created by the new
GRE rules are complex and numerous, it is
particularly important to reiterate that only
one testamentary trust will be afforded GRE
status under the new rules.3 Under the existing rules, clever will-planning can cause
multiple estates to arise on a testator’s death
as long as the terms are sufficiently varied to
avoid duplication, and each of these separate
testamentary trusts will be subject to graduated tax rates. Under Bill C-43, however, since
only one GRE will be subject to graduated
tax rates, inter-vivos and non-GRE testamentary trusts will find themselves on an even
keel.
Changes made to rules for
deemed disposition on death
As discussed in the 2014 article, under the
existing rules, the death of the (last surviving) beneficiary spouse results in a deemed
disposition within the spousal or JP trust.
Under the new rules, however, there will be
a deemed year-end on the day of death of a
spousal trust’s beneficiary (or on the date of
death of a JP trust’s last surviving spouse).
Any income for that year, up to the date of
death, and any capital gains resulting from
the deemed disposition of the spousal or JP
trust property, will be taxed on the individual’s
terminal return.4
Consider the example of John and Jane Doe
from the 2014 article, in which preferred
shares are owned by a spousal trust. Under
the new rules, the deemed disposition of
such shares will be reported on the terminal
return of the de