Graduated Rate Estates (GRE): Guide for Tax Attorneys in Toronto
December 23, 2020
Red Meat & Samulovitch P.C.
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Introduction – Taxation of Testamentary Trusts and Estates
A testamentary trust is one that is obtained as a result of the
Death of an individual. Once under the Canadian income tax system
When a person dies, that person's entire property counts
to have been disposed of by the individual's estate at the current fair and then acquired again
Market value. Once the estate has paid its debts and taxes, it will
can then distribute his remaining assets according to the deceased
the will of the individual. One option is that this will guide it
Some or all of these assets are intended to be transferred to a trust
known as testamentary trust. One person can create any number
of testamentary trust in his will. Before January 1, 2016 everyone
Testamentary trusts were subject to tiered tax rates that
meant that much of their income was taxed at a lower rate, which allowed
for a significant distribution of income. From January 1, 2016
Graduate Rate Estates (GREs) are the only testamentary trusts that
can benefit from tiered tax rates.
What is a Graduated Rate Estate (GRE)?
A graduated estate is a specific type of will
Trust that arises when an individual dies. Every deceased
Individual can only have one GRE and must meet several
1) The estate must identify itself as a GRE in its first tax
2) no other estate of the person was designated as a
3) The estate must use the deceased's social
Security number in the tax return.
Benefits of a Graduated Rate Estate
The main benefit of a GRE is that it has a degree
Tax rates on any income it earns, similar to an individual's for
the first 36 months after the death of the testator. On the other hand,
A normal estate or trust pays taxes at the highest marginal rate of 53.53%
earned in Ontario in 2020 on every dollar of income. What that?
This means that the GRE can save compared to a normal trust
$ 20,000 per year based on marginal tax rate, which adds up to total
Savings of approximately $ 60,000 to $ 80,000 over the GREs
Lifetime. Speak to one of our experienced Toronto tax attorneys for
Tax advice to minimize the tax liability of your estate.
A secondary benefit to tiered property properties is that they can
Choose a non-calendar year end and all you have to do is pay
Taxes on your income at the end of the year, not monthly
or quarterly payments, as opposed to regular trusts. This relative
The tax deferral of the GRE helps to free up possible funds
otherwise used from the estate.
In addition, tiered properties benefit from a more flexible location
Donation tax benefits. In particular, the GRE can claim a donation tax
Credits in the year the donation is made or one of the following
five tax years and it can reduce the donation tax credit to one
of the previous tax years. It is also able to assign donation tax
Credits to the tax return of the deceased or the
Deceased person's tax return for the year before death.
Furthermore, graduated estates have different administrative ones
Services. GREs can use capital loss carryforwards to carry
Capital losses back to the deceased's final tax year. she
are also entitled to reimbursements beyond the normal assessment period
and have an extended notice period.
Pro Tax Tip – Update Older Wills
As already mentioned, only graduated discounts came into effect
At the beginning of 2016, normal testamentary trusts were created
in or after 2016 also lost the ability to benefit from a degree
Tax rates. What that means is that everyone uses testamentary trusts
Wills made before 2016 are likely to be out of date
This can lead to significantly worse tax results than expected
The will was drawn up first. It is therefore important that individuals with an older will plan for tax purposes
Have them reevaluated and updated by our top Toronto tax law
The content of this article is intended to provide a general overview
Guide to the subject. Expert advice should be obtained
about your particular circumstances.
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