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Qualified Disability Trust

A qualified disability trust (QDT) is a trust that, for a given taxation year (the “trust year”) meets the following conditions:

  • It is a testamentary trust that arose on and as a consequence of an individual's death.
  • It is resident in Canada throughout the trust year.
  • It makes a joint election (using the prescribed form) with one or more of its electing beneficiaries to be considered a QDT.
  • It provides the social insurance number of each of the electing beneficiaries in its income tax return.
  • Each electing beneficiary meets the following conditions:
    • The beneficiary is an individual designated as a beneficiary in the instrument that established the trust.
    • The beneficiary did not make a joint election with another trust, for a taxation year of a trust ending during the beneficiary's taxation year, to designate that trust as a QDT.
  • The trust did not pay or distribute any amount in the form of capital to a beneficiary who is not an electing beneficiary.

QDTs and the recovery tax 

A QDT that is a graduated rate estate for the year is subject to the recovery tax in any of the following situations:

  • The trust ceases, during the year, to have as beneficiaries individuals who were its electing beneficiaries during one or more previous taxation years. This can be caused, for example, by the death of the electing beneficiary or, where the trust had more than one electing beneficiary, by the death of the last electing beneficiary.
  • The trust is no longer resident in Canada.
  • The trust distributed an amount in the form of capital to a beneficiary who was not an electing beneficiary during the previous taxation year. However, certain payments made by the trust do not result in the recovery tax, such as payments made to a beneficiary as the debtor of the trust.

To calculate the recovery tax, complete form TP-768.1-V, Recovery Tax: Qualified Disability Trust, and enter the result from line 811 on line 150.1 of the Trust Income Tax Return (TP-646-V).

You must take the recovery tax into account when calculating instalment payments, if applicable.

If the trust is designated as a QDT, you must check box 27 of the trust income tax return and provide the requested documents and information.

For more information about tax measures for persons with disabilities, see Taxation and Persons With Disabilities (IN-132-V).

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