April 29, 2021
All Tax Articles

A qualifying spousal trust can be used to defer tax when transferring property from one spouse to the trust in which the other spouse (or common-law partner) is a beneficiary. Normally, you can transfer property into the spousal trust on a tax-free rollover basis. That is, the transfer takes place for proceeds equal to your tax cost of the property, and the trust takes over that same tax cost.

However, when your spouse, the beneficiary of the trust, dies, there is a deemed disposition of the trust properties at their fair market values. Also, the trust is deemed to have a taxation year-end on their death, with a new taxation year beginning immediately thereafter. 

Where a charitable donation of this type of spousal trust is made after the taxation year that is deemed to end upon the spouse’s death ("Year X") and by the trust’s filing-due date for Year X, the donations credit can be claimed by the trust in Year X. The filing due-date for Year X is 90 days after the end of the calendar year in which Year X ends. The trust can claim the donations tax credit for Year X for the donation, or alternatively for the year of the donation or the following five years.

This letter summarizes recent tax developments and tax planning opportunities from a third-party affiliate; however, we recommend that you consult with an expert before embarking on any of the suggestions contained in this blog post, which are appropriate to your own specific requirements. Please feel free to get in touch with Lee & Sharpe to discuss anything detailed above, we would be pleased to help.
Douglas K. DeBeck

Hello, my name is Douglas K. DeBeck, I am a partner at Lee & Sharpe.

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