ARTICLE · 05 JANUARY 2016

Graduated Rate Estates – Benefits And Drawbacks

Dale & Lessmann LLP

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Much talk about the upcoming changes to the taxation of trusts and estates has surrounded the introduction of the concept of Graduated Rate Estates.

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Much talk about the upcoming changes to the taxation of trusts and estates has surrounded the introduction of the concept of Graduated Rate Estates. Effective January 1, 2016, the Income Tax Act will recognize 3 types of testamentary trusts: a Graduated Rate Estate ("GRE"), a Qualified Disability Trust ("QDT") and all other testamentary trusts ("OTT").

Currently, testamentary trusts are taxed in the same way as individuals – at graduated tax rates. Following the implementation of the new tax changes, OTTs will be taxed at the highest marginal tax rates. QDTs – trusts where the beneficiary qualifies for a disability tax credit, and GREs, will continue to be eligible for the graduated rates of tax.

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