• (613) 544-0211
  • Email
  • Map
  • Main
  • Firm
  • Practice Areas
  • People
  • Community
  • Blog
  • Contact
  • Students
  • Employment

Cunningham Swan

Kingston Law Services

  • Environmental Law Practice Area
  • Energy Law Practice Area
  • Military Administrative Law

Finding Solutions. Getting Results.

  • Business Law
  • Wills and Estates Law
  • Family Law
  • Litigation
  • Real Estate Law
  • Labour and Employment Law
  • Municipal Law
  • Construction Law
  • Land Use Planning & Development
  • Environmental Law
  • Energy Law
  • Criminal Law and Regulatory Prosecutions
  • Military Administrative Law

Staff

Staff ListingPatience McLeod
Director of Operations

Lawyers

  • Alan Whyte *
  • Andrea Risk
  • Andrew Bonham
  • Andrew Sapiano
  • Angela Fallow
  • Angela Severson
  • Bob Little
  • Brian Gillingham
  • Carolyn Shelley
  • Claire Kadwell
  • Danielle Russell
  • David Adams
  • David Munday
  • Desiree Smith
  • Emma Cotman
  • Eric Bennett *
  • Greg Dobney
  • James L. McDonald
  • Kalen Ingram
  • Kurt Pearson
  • Lesley Kendall
  • Lisa Asbreuk *
  • Mary-Alice Thompson *
  • Matt Benson
  • Matt Taft
  • Paul Andrews
  • Peter Trousdale
  • Robert (Bob) Tchegus
  • Robert Gencarelli
  • Robert Maratta
  • Rory Fowler
  • Tony Fleming
Learn more about our students:
  • Articling Students
  • Summer Students
  • Students Testimonials
  • Frequently Asked Questions

Students

Cunningham Swan’s student programme aims to provide future lawyers with the opportunity to become involved in all practice areas and all aspects of legal work. The goal is to develop students into skilled and competent lawyers who will contribute to the firm’s growth.

New Tax Rules for 2016 – Qualified Disability Trusts

Posted on November 3, 2015 by Mary-Alice Thompson *

As I have mentioned in previous blogs, the 2014 Federal Budget introduced new rules for testamentary trusts. Beginning on the 1st of January 2016, testamentary trusts will be subject to top flat income tax rates. There are two important exceptions to this rule: one is a Graduated Rate Estate and the other is a Qualified Disability Trust (QDT).

As the name suggests, the QDT is a trust for a disabled person. To qualify, the trust must:

(1) be a testamentary trust, (2) be resident in Canada, and (3) have an electing beneficiary who is eligible for the Federal Disability Tax Credit.

So someone planning to use a QDT for a disabled child would need a trust in his will or in a life insurance trust. In the first year following the parent’s death, the executor or insurance trustee and the beneficiary child would have to file a joint election with Canada Revenue Agency, designating the trust as a QDT. If the child cannot make the designation herself, she may need a family member to become her guardian in order to make the election.

The electing beneficiary must qualify for Disability Tax Credit, meaning her disability must be severe and prolonged. A QDT can have any number of beneficiaries, as long as one of them is an electing beneficiary, but each electing beneficiary can have only one QDT. So, if a parent and a grandparent each leave a trust for the disabled child, only one of those trusts will be eligible for the lower tax rates. Or if a parent wants to leave a life insurance policy and her estate for a child, either the estate or the life insurance will be a QDT, but not both.

QDT trustees need to keep accurate records of income paid and retained in the trust. When the disabled child dies and funds remaining in the trust are distributed to other beneficiaries, the trust is no longer a QDT. The trust must pay a penalty called a recovery tax on income retained in the trust that received preferential tax rates in previous years. The calculation of recovery tax is complex and will require full records and a good accountant.

The QDT may assist some families planning for a disabled child. The eligibility is different than for “Henson” trusts set up to plan around the Ontario Disability Support Program, however. Add to that the complexity of the recovery tax, and the limitations of only one trust per beneficiary. Before making a plan for a QDT parents should carefully weigh the pros and cons with their advisors.

 

This update is provided as a courtesy for your general information and does not constitute legal advice. Every organization is unique and may also be subject to other laws not contemplated in this update. This update should not be relied on as a substitute for legal advice which necessarily must be specific to your organization, your objects, your operations, and your structure. If you have any questions about this information please contact one of the lawyers listed above.


Related Areas

  • Family Law
  • Wills and Estates Law
  • Business Law

Related Lawyers

  • Mary-Alice Thompson *

Search

© 2018 Cunningham, Swan, Carty, Little & Bonham LLP. All rights reserved. · Terms & Privacy · Site Design: Switchclick