Family Trusts – Beware the 21 Year Anniversary
In a previous blogs here and here, we have discussed family trusts and indicated that there are a number of special tax rules that can apply to trusts. One of those rules that can apply is a deemed disposition of assets on the 21st anniversary of the trust.
What this means is that if the trust is still in existence and holding assets 21 years from its creation date, for Canadian income tax purposes, the trust will be deemed to dispose of those assets for fair market value, and reacquire them at the same amount. If the value of the assets has increased since the date the trust purchased them, the trust will realize a capital gain that will be taxable to the trust, so taxes may be payable.
There may be planning opportunities to minimize or eliminate the tax payable on the deemed disposition of a trust on its 21-year anniversary. The specific facts relating to your situation will determine what, if any, options are available to you.
If you have a family trust nearing its 21-year anniversary, or if you have any questions regarding your trust, please contact a member of our tax team.
This blog post is intended to provide general information and does not constitute legal advice. You should consult a lawyer for advice regarding your individual situation.
Every effort has been made to ensure the contents of the blog post were accurate as of the date it was written, however, the law can change and we cannot guarantee that the information remains accurate. In addition, because the comments above are of a general nature, they may not apply for every situation. If you have questions, please contact us and we would be happy to discuss your individual circumstances, and whether there have been any changes to the law that would affect the information presented.