Inter Vivos Trust

Any trust other than a testamentary trust is an inter vivos trust.

A trust may lose its status as a testamentary trust and become an inter vivos trust further to one of the following events:

  • the property or income of the trust was not distributed to beneficiaries in accordance with the terms of the will;
  • the trust was created after November 12, 1981, and before the end of the taxation year property was contributed to the trust otherwise than by succession;
  • the trust was created before November 13, 1981, and:
    • after June 28, 1982, property was contributed to the trust otherwise than by succession, or
    • before the end of the taxation year, the fair market value (FMV) of all property that was contributed to the trust, otherwise than by succession, exceeds the FMV of the property that was contributed by succession (the FMV of the property is its FMV at the time it was acquired by the trust and includes the FMV of property that was substituted for such property);
  • before the end of the taxation year, the trust incurs a debt (or any other obligation to pay an amount):
    • owed to a beneficiary (or any person or partnership not dealing at arm's length with a beneficiary), or
    • guaranteed by a beneficiary (or any person or partnership not dealing at arm's length with a beneficiary).
Note

This restriction does not apply to a debt (or any other obligation) owed to a beneficiary and incurred in satisfaction of the beneficiary's right to enforce payment by the trust, before the debt is owed, of an amount on the trust's income, capital or capital gains.

Taxation year of an inter vivos trust

The taxation year of an inter vivos trust corresponds to the calendar year.

However, a mutual fund trust may elect to have its taxation year end on December 15 instead of December 31.

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