Trust for a Beneficiary Under 21 Years of Age

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A testamentary or inter vivos trust may keep, on behalf of a beneficiary, the portion of its income earned in the year that did not become payable to the beneficiary in the year because the beneficiary is under 21 years of age. The portion in question is nonetheless considered to have become payable (therefore allocated) to the beneficiary in the year if the following conditions are met:

  • The trust was resident in Canada throughout the taxation year.
  • The beneficiary was under 21 years of age at the end of the taxation year.
  • The right to the trust's income:
    • was vested in the beneficiary no later than the end of the year (and no one exercised a discretionary power on that right), and
    • was not subject to any future condition, other than a condition respecting the beneficiary's survival to the age of 40.

The trust must therefore allocate to the beneficiary the portion of the income considered to have become payable during the year to the beneficiary concerned. The amount can be deducted on line 81 of the Trust Income Tax Return (TP-646-V).

A person who transferred or loaned property to the trust may be subject to the income attribution rule. This means that this person, not the trust nor the beneficiary, may have to report the income (or loss) derived from this property or the capital gain (or loss) derived from the disposition of the property. For more information, see Trust of Which the Beneficiary Is the Spouse or a Minor and Revocable or Blind Trust.

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