Testamentary trust – when does it start?

Written on February 13, 2013 – 9:00 am | by Derek de Gannes

As is often the case, an estate is created and the estate trustees are instructed under the Will to set up a number of trusts from the residue of the estate. Any trustee will tell you that it takes a period of time for the estate to be administered and for these testamentary trusts to be funded.

So, if there is no clear distinction between the residual trust(s) and the estate, one might wonder what should be reported as the commencement date of the trust(s). In other words, do these trusts exist at the date of death even though they may not, at that time, actually have title to any assets (since the assets are in the name of the estate which is under administration) or do they commence at some later time?

In a recent response to a question, the Canada Revenue Agency (CRA) confirmed their position on the matter. Traditionally, the CRA has not attributed any tax consequences to the transition from estate administration to trust administration and generally has viewed the trusts created out of the residue as arising on death. In their view, each trust created out of the estate residue is given the same commencement date and taxation year end date as the estate.

These are comforting words from the CRA. Be sure to consult a pro when tax questions arise with trusts and estates.

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