How to minimize or defer taxation on your trust’s 21st anniversary

At the 21 year mark, a trust is deemed to have disposed all of its assets at fair market value. And while that doesn’t mean that the beneficiaries lose the assets, it does mean that they could be saddled with an unexpected and very large capital gains bill if the proper planning isn’t conducted before the expiry date is reached. This is known as the 21 year trust tax rule.

Trusts are an indispensable tool that can produce significant benefits in wealth optimization and estate planning. Trusts separate the management and control of an asset from its ownership. When correctly structured and maintained, a trust can save a family or group of individuals from overpaying taxes, while ensuring that all major financial decisions are made by a capable and experienced contact point.

Trusts are largely a long-term strategy, and as such, people commonly think of them as a “set it and forget it” financial arrangement. And while that is true to a certain extent (once a trust is set in motion it can largely operate with minimal maintenance), trusts do actually have an expiry date.

Thankfully, there are several strategies that can be employed in order to mitigate capital gains at the 21 year mark.

In this article, our Zeifmans Trust and Estate experts, share the following to help you understand the various options, and when to seek professional advice well in advance of the deadline to ensure the avoidance of penalties:

  • Importance of remembering your 21 year trust anniversary and why
  • Defining what exactly a 21 year trust is
  • How the 21 year trust tax rules apply to you
  • How to dispose of a 21 year trust
  • What to do if the beneficiaries of the trust are non-Canadian residents
  • Non-tax considerations to make when deciding how to handle the 21year tax disposition rules

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To learn more, reach out to our estates and trusts team today. The team at Zeifmans has more than 6 decades of experience assisting clients in crafting successful legacy wealth optimization processes. Over the years, our taxation professionals have amassed unparalleled subject matter expertise, and guided thousands of clients to sustainable wealth that spans generations.

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With over 25 years of experience and 100+ successful transactions under her belt, Partner, Jennifer Chasson, brings invaluable expertise to the table. Whether it’s guiding as an advisor, mentor underwriter, ...