Trust for a minor

Tax Topics
1

This is a trust for a minor set-up from the will of his grandmother. The father on the minor is the Trustee.
Does the Trust have to pay the taxes on the $300 of interest income or can the interest be allocated to the minor.

Thank you

2

This does depend if there is a requirement to pay the minor, so you will need to go back to the original terms of the trust. In the case which I have dealt with, there was no requirement to pay the child (unfettered right of trustee to disburse,) so we couldn’t disburse the funds on demand of the child. The trust had to pay tax.

When the child came of age, the rules changed. We could disburse directly to the child, so were permitted to issue tax slips to the child without invoking Section 74.

Advice: keep copies of the will and death certificate as the bank will lose these. They are not set up for trusts under wills lasting more than a few years. The trustee will be locked out of the funds when the bank loses its paperwork.

1 Like
3

Thank you Tim that is excellent. Your advice and guidance is exactly what I was looking for.

I will put a note to file.

Eugene

4

Thanks, Tim, for that advice! THAT is what that makes this forum valuable. We can’t all have experience in all areas.

5

I will presume that the Lawyer handling the Estate informed the Office of the Public Guardian of this will, given that it involved a minor who was a benefitiary…

6

Yes that is the case. It is the first time I seen one of those.

Eugene

7

Interesting. I’ve been meaning to ask if anyone has experience with a similar scenario:

I have a client - a minor child who was involved in an car accident where her father was killed (she was a passenger; they were hit by a drunk driver). The Public Guardian is the trustee, and issues two T3 slips each year - for income earned on the investment of proceeds from each of two settlements. One of the settlements was an injury claim, and as such involves ITA 81(1)(g.1). The Public Guardian includes an instruction letter with the T3 slips each year stating:

If the funds were paid as a result of an injury to the child, CRA does not consider the income earned on the funds to be taxable until the year after the child turns twenty one.

I believe this is a case where the income earned in the trust was “payable” to the minor child (not “paid”), but not taxable during the year. The second T3 slip is for income payable and taxable during the year. I prepare the tax return for the taxable portion, provide it to the Public Guardian, and they pay the taxes. I have been saving the “non-taxable” T3 slips, expecting they will all have to be reported when the child turns 22.

Does this sound correct/appropriate?

8

I have an additional question regarding this. With the new trust rules, if a either a Public Guardian or a parent sets up a bank account or an investment account with funds in trust for a child [minor or adult] and a slip is issued to the child to report the income, are there now additional reporting obligations? What I mean is, is this considered a trust for which a T3 return has to be filed under the new rules?