Changes To The Use Of Life Interest Trusts

On December 17, 2014, Bill C-43 received Royal Assent, ushering in a new era of estate planning with proposed changes to the Income Tax Act (the "Tax Act"). Included in the bill are changes which will have profound implications on planning using spousal trusts, alter ego trusts, joint spousal or common law partner trusts (referred to herein as "life interest trusts"). The new rules will apply as of January 1, 2016.

DEEMED DISPOSITIONS

Starting in 2016, life interest trusts will undergo a deemed disposition triggered at the end of the date of the death of the last surviving life interest beneficiary, which will either be the settlor or the spouse, depending on the nature of the life interest trust. All of the trust's income for the tax year, including capital gains arising on the deemed disposition of assets triggered by the death of the life interest beneficiary, will be deemed to have been made payable to the life interest beneficiary and will be included in his