A popular estate planning tool in Canada is under review by
Canada's Department of Finance as part of Economic Action Plan
2013.
Currently, income from a testamentary trust, usually created by
the deceased's will, may be taxed at the graduated marginal tax
rates available to an individual. This permits an individual
beneficiary to save tax, by having the individual's
testamentary trust income taxed as if it was a separate person,
with the benefit of the lower tax rates applicable to lower ranges
of income. The potential tax savings to an individual who is
already in the highest tax bracket for non-trust income, is in the
range of $12,000-$14,000 per year, per beneficiary.
A person can create many separate testamentary trusts for
children, grandchildren and others, and if the trust income is high
enough, substantial income tax can be saved each year the trusts
continue. If the trust is not producing significant income, e.g.
the trust holds a personal use residence
