What is the 21 year rule for trusts in Canada?

Commonly referred to as the “21 year rule,” the rule deems certain types of trusts to dispose of their capital property and recognize the accrued gains every 21 years. Without this rule, trusts could be used to defer the realization of a capital gain for more than 21 years (80 years in BC).

Can a trust distribute more than net income?

According to U.S. tax code, estates and trusts are allowed to deduct the distributable net income or the sum of the trust income required to be distributed—whichever is less—and other amounts “properly paid or credited or required to be distributed” to beneficiaries to prevent double taxation on income.

How much can you distribute from a trust to a minor?

As a result, this increased the amount of net income of a trust that could effectively be distributed to a minor beneficiary tax-free from $416 to $3,333. Where the minor’s income from the trust distribution was $3,333, the tax payable before the Rebate was $1,500.

What are the tax implications of discretionary trusts for minors?

Distributions of passive income to certain minors from discretionary trusts are subject to a higher tax rate (generally the top marginal rate for individuals).

What are the rules for making distributions from a trust?

The trustee must have discretion to make distributions of income and principal from the trust to the child or for the child’s benefit until the child attains the age of 21; b. The beneficiary must be permitted to withdraw the entire balance of the trust at age 21; and c.

When can a minor claim assets from a trust?

The person creating the trust may also place conditions on the trust, which must be met before the child or minor can claim the assets. For example, the asset may be distributed “when the minor is at least 21 years old and has graduated from college”.