Pursuant to the Income Tax Act, an inter vivos trust is
deemed to dispose of its capital property at fair market value on
the 21st anniversary of its date of settlement and each 21st
anniversary thereafter. To avoid the deemed disposition, a common
planning step is to have the trust distribute and transfer
appreciated capital property to the capital beneficiaries before
the 21st anniversary. What happens, however, if the trust provides
no authority or discretion to encroach on capital and distribute at
this time?
This was the situation in Eaton v. Eaton-Kent 2013 ONSC
7985; the trustees addressed this issue by applying to the court to
amend the trust under the Variation of Trusts Act. By
court order, the trust was varied to add administrative and
discretionary powers so that a reorganization could be implemented,
leaving all beneficiaries economically whole and accelerating the
distribution of capital. In addition, the trustees were empowered
to require that a
