Some real estate attorneys may be more familiar with the intricacies of these types of trusts than others.
Disability Trust Tax Planning
A trust written in a will doesn’t come into effect until you die, but you can create a trust while you’re still alive. Trusts file income tax returns in the same way as individual taxpayers. Taxes are based on the income earned by the trust. However, income can be allocated to beneficiaries based on income tax strategies and other practical considerations.
One of the benefits of a properly drafted trust that meets the criteria for a Qualified Disability Trust (QDT) is that it pays taxes at the same graduated rate as an individual. Otherwise, the trust may be subject to top tax rates on all its income.
Trusts may be able to allocate a limited amount of income to disabled beneficiaries without prejudice to government benefits, or they may be able to allocate tax-exempt principal.
Not all accountants are familiar with trust taxation, so tax advice after a trust is active is important.
How to use RDSP for estate planning?
Another potential tool to consider for your family is Libbie, a Registered Disability Savings Plan (RDSP). Assuming your family member qualifies for the Disability Tax Credit (DTC), the family member or their representative can open her RDSP account.
An RDSP is an account that allows you to invest on a deferred tax basis. The year the beneficiary turns her 59 he can open until December 31st. If the beneficiary is under the age of 49, contributions to the account will receive additional government subsidies and may also receive government bonds if income is low. Grants and bonds can be much higher than the donation itself, so this can be very lucrative.
If Libby, a family member in your case, is a financially dependent child or grandchild, leave a Registered Retirement Savings Plan (RRSP) or Registered Retirement Income Fund (RRIF) to them upon your death. , may also own part or all of it. On a deferred tax basis he will be credited to the RDSP. The RDSP account has a lifetime limit of $200,000 for her, which applies to previous contributions and permissible tax deferred transfers from the RRSP or RRIF accounts.
