The amendments to the Income Tax Act (R.S.C., 1985, c. 1 (5th Supp.)) (the “I.T.A.”) have eliminated graduated rate taxation for testamentary trusts, which were previously taxed at rates applicable to individuals. Starting next year, testamentary trusts will be taxed at the highest marginal rate of taxation, subject to a couple of exceptions, one of which applies to a testamentary trust that can be considered a Graduated Rate Estate (GRE). The purpose of these amendments is to try to eliminate unequal treatment of testamentary trusts as compared to inter vivos trusts, which are taxed at the highest marginal tax rate, while testamentary trusts have enjoyed graduated rates for decades.
Starting December 31, 2015, the I.T.A. s. 248(1) will contain a definition for a GRE. In order to qualify as a GRE and benefit from graduated rates of taxation, no more than 36 months can have passed after the death of the testator whose estate established the trust, it must designate itself as a GRE, and only one GRE can be designated per individual. Going forward, as noted in this article from a national law firm, only GREs may benefit from graduated tax rates, use certain loss carry-back provisions, and have a non-calendar year end.
Another exception to the elimination of graduated rates of taxation applies to a qualified disability trust. The I.T.A. s. 122(3) states that in order to be a qualified disability trust, it must: (i) be a testamentary trust; (ii) the beneficiaries of the trust must have made a joint election with the trust for the trust to be a qualified disability trust, and (iii) s. 118.3(1)(a) to (b) must apply to such beneficiaries.
There have also been changes to treatment of charitable donations made in a Will. Whereas, in the past, a charitable gift was considered to be made immediately preceding the death of the testator, the new rules provide that the gift is made at the time it is actually transferred to the donee. The value of the property will also be determined on this basis. The amount of the charitable donation can then be allocated between the deceased or the GRE, as per I.T.A. s. 118.1(1), as long as the Estate can be considered a GRE at the time. The amount of the gift can be deducted by the deceased in the year the donation was made or used in the preceding taxation year. Alternatively, the gift can be deducted by the GRE in the year of the donation, carried forward, or carried back for up to the 36 months that a GRE may exist as such.
Thank you for reading.
Today on Hull on Estates, Jonathon Kappy and Noah Weisberg discuss the recent Regulations amending the Rules of Civil Procedure including amendments to the authentication and confirmation of estate trustees, and passing of accounts.
Should you have any questions, please email us at email@example.com, or leave a comment on our blog below.
The time line in passing of accounts proceedings is being changed. Recent amendments to the Ontario Rules of Civil Procedure extend the time period for service of the Notice of Application to pass accounts, and move up the time within which to deliver a Notice of Objection.
The amendments also increase the costs allowable upon an unopposed passing of accounts.
The amendments, found in Ontario Regulation 55/12, come into effect on July 1, 2012.
With respect to timing, the amendments make the following changes:
- Notice of Application: Ontario respondent: 60 days notice (up from 45)
- Notice of Application: Outside Ontario respondent: 75 days notice (up from 60)
- Notice of Objection: 30 days before hearing (up from 20 days)
- Response from Children’s Lawyer or Public Guardian: 30 days before hearing (up from 20 days)
The amendments also codify what is required where a request for increased costs is being made, and the time frame for making and opposing such a request.
The tariff for costs allowable on an uncontested passing allows for greater costs. The costs range from $2,500 for an estate having a value of less than $300,000, to $7,500 for an estate having a value of $3,000,000 or more (up from a range of $800 to $5,000).
Have a great weekend.
Paul Trudelle – Click here for more information on Paul Trudelle.
In keeping with modern advances in our society, The Honourable Coulter Osborne (former Associate Chief Justice of Ontario), was asked to propose some options that would assist in making our civil justice system more accessible and affordable. The Honourable Coulter Osborne submitted his findings and recommendations and in December 2008 The Civil Rules Committee filed amendments, which are scheduled to come into effect on January 1, 2010 (amendments can be found here). It is important to note that there is no transitional stage with respect to the amendments coming into force.
The following are a few amendments that caught my eye:
1. Rule 1.04 (1.1) provides that the court shall make orders and give directions that are proportionate to the importance and complexity of issues, and the amount involved, in the proceeding.
2. Rule 1.08 will permit the court, on its own initiative, to hear matters by telephone or video conference.
3. Pursuant to Rule 20 (summary judgment), the general test to obtain judgment is the moving parties ability to show that there is "no genuine issue for trial". Rule 20 has now been amended which imposes the burden on the moving party to show that there is "no genuine issue requiring a trial".
4. In actions commenced in Toronto, Ottawa and Essex County, mandatory mediations are to take place within 180 days, rather than from 90 days of filing the first defence unless the court orders otherwise.
5. Where the discovery tools are likely to be implemented in a litigious matter, Rule 29.1 now requires the parties to agree to a discovery plan before the earlier of 60 days after the close of pleadings or such longer period as agreed. The discovery plan must be in writing and it must include the intended scope of documentary discovery, taking into account relevance, costs and the importance and complexity of the issues.
6. With respect to examinations for discovery, regardless of the number of parties or other persons to be examined, no party is allowed to examine for more than seven hours unless the party has obtained the consent of the parties or has obtained a court order.
7. The monetary jurisdiction of the Small Claims Court will be increased to $25,000.00.
Again, these amendments were made with a view that it would make our civil justice system more accessible and affordable. For instance, permitting courts to hear matters via telephone or video conference will free up judicial resources, and reduce Lawyers fees. Increasing the monetary jurisdiction of Small Claims Court to $25,000.00 will provide access to justice for many in need and at the same time eliminate the demanding obligations that are imposed upon parties under the Rules of Civil Procedure. I will be looking on with interest as these amendments take effect in the new year.
Thank you for reading and have a great day.