All About Estates

To vary or not to vary

The Canada Revenue Agency recently responded to a ruling request as to whether or not a proposed amendment to a trust agreement could be so significant to cause a resettlement of the trust, or a disposition of a beneficiary’s interest in the trust

Before the enactment of variation of trusts legislation, trustees were generally bound to administer the trust according to its terms.  Unless specifically allowed in the trust deed, the trustees could not make even the simplest administrative change to the terms of a trust, irrespective of the benefits that would accrue to the beneficiaries because of such a change.  The harsh effect of this basic rule of trust law has been dampened by the passage of variation of trusts legislation in most Canadian provinces.

The possible tax concerns resulting from a variation of trust include whether the variation constitutes a disposition of property, whether the variation establishes a new trust, and the possible application of the income attribution rules.

Simply put, the proposed change in the trust agreement would was to remove the trustee age restriction cap.  At first blush, the logical result answer as to the significance of the change would be not enough to trigger a harsh result.  The Canada Revenue Agency agreed that the proposed Trust Amendment will not, in and by itself, result in a disposition of all or any part of the interest in the Trust of any of the Beneficiaries of the Trust.

About Derek de Gannes
Derek A. de Gannes: Senior Director, Private Client Services 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:


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