Parliament recently enacted significant changes to the taxation
of estates and trusts and charitable giving on death beginning in
2016. These changes include beneficial income tax treatment
for qualified disability trusts or "QDTs". The
purpose of this publication is to briefly summarize these important
changes and the impact they may have on your estate plan.
Income Taxed at Graduated Rates
At the present time, the income of a trust established by a will
(a "testamentary trust") is subject to tax at graduated
rates, that is, the rate of tax increases as the amount of the
trust's income increases until the trust's income exceeds
$150,000. Income greater than that amount is taxed at the top
marginal rate of 45.8% (in British Columbia, to be reduced in 2016
to 43.7%). Beginning in 2016, the income of most testamentary
trusts will be subject to tax at the top marginal rate.
However, the income of QDTs will continue to be taxed at graduated
rates.
