Effective on January 1, 2016, there will be significant changes
to the manner in which trusts created under a will are subject to
income tax. As there are no grandparenting provisions these changes
will also affect current wills, trusts and estates.
Two substantial changes to trust and estate taxation are:
- The introduction of Graduated Rate Estates ("GREs");
and
- The shift of the tax burden for Spousal/Common-Law Partner
trusts, Joint Spousal/Common-Law Partner Trusts, and Alter-Ego
Trusts ("Spousal Trusts").
GREs and Graduated Rates
Currently, any trust that arises as a consequence of death
("Testamentary Trust") is taxed at graduated rates
indefinitely. This has led to potential savings of over $10,000 per
year per Testamentary Trust. While Testamentary Trusts have been
used extensively for estate planning, starting in 2016 only
qualified disability trusts and GREs will be taxed at graduated
rates. All other trusts, including Testamentary Trusts, will
