Federal government moves to eliminate value of testamentary trusts
Starting in 2016, the federal government wants to effectively abolish testamentary trusts, a common estate planning technique that allows Canadians to reduce tax on the investment income earned from their assets, by their beneficiaries, after their death.
This type of arrangement allows one person, typically known as the estate trustee, to hold and manages the deceased's property for the benefit of someone else, known as the beneficiary, explains Jamie Golombek, who runs CIBC's estate planning unit.
Right now, testamentary trusts and estates pay federal tax at graduated tax rates starting at 15% federally for income under $43,561 (in 2013) and ultimately rising to 29% once income reaches about $135,000. Each province then takes its own proportional cut.
But it's still a great deal, since trusts are not that dificult to establish and are used extensively by advisors.