The Tax Chick Podcast Musings of a Tax Chick... Advanced trust topics!
Mar 26, 2024
Dive into the intricate world of trusts with advanced insights! Discover the tax risks of adding or removing beneficiaries and learn about the intriguing benefits of alter ego and joint spousal trusts. Explore how family law can impact trust interests during separations and what courts consider when valuing discretionary trust interests. Uncover potential corporate association issues arising from family trusts, as well as the vital ongoing maintenance and reporting duties that trustees must uphold. It's a treasure trove of knowledge for trust aficionados!
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Document Beneficiary Changes Carefully
- Check the trust deed before adding or removing beneficiaries and document any change in trustee minutes contemporaneously.
- Remember removing is easier than adding because adding can trigger CRA resettlement concerns and tax consequences.
Adding Beneficiaries Can Trigger Resettlement
- Adding beneficiaries can be treated by CRA as a trust resettlement, causing deemed dispositions and tax consequences.
- CRA guidance (e.g., Views 9209655 and later documents) treats significant variations or diminished existing rights as risky for tax triggers.
Weigh Costs And Benefits Before Creating One
- Consider costs, loss of control, privacy needs, and potential U.S. tax exposure before creating an alter ego trust.
- Evaluate provincial probate savings versus setup and maintenance costs to decide if it's worth it.