All About Estates

Estate beneficiary of an inter-vivos trust

The Canada Revenue Agency (CRA) was asked if an estate that received property from an inter-vivos trust that is a life insurance policyholder would be a graduated rate estate (GRE) if the estate received property as beneficiary?

The definition of a GRE specifies that the estate must be at that time a testamentary trust. The definition of testamentary trust requires that (for trusts created after 1981) no property has been contributed to the trust otherwise than by an individual on or after the individual’s death and as a consequence thereof.

In the case presented above the individual whose life is insured is not the policyholder, but rather it is the inter vivos trust that is the policyholder. Any property contributed to the estate as a beneficiary of the inter vivos trust would not meet the requirement that the property be contributed to the estate by an individual on or after the individual’s death and as a consequence thereof. Hence in such a scenario the estate would not meet the definition of a graduated rate estate and the benefits that follow.

The takeaway from this message is to have a look at your estate planning for any blockers to the GRE benefits.

About Derek de Gannes
Derek A. de Gannes: Director, Domestic & International Tax of RSM Canada. RSM Canada is committed to the highest level of integrity, quality and professionalism and provides clients with solutions in the area of Audit, Tax and Transaction Services. Email: derek.degannes@rsmcanada.com