Inter-vivos trust
For tax purposes, an inter-vivos trust is a trust that is not a testamentary trust, meaning, generally, not one created on and as a result of an individual’s death. Under the Income Tax Act a trust is deemed to dispose of certain property on set days, which for some trusts include a day 21 years after the trust was created.
A family that holds the shares of its business through a trust meets this term. CRA’s T3 Trust Guide sorts trusts into testamentary and inter vivos: an inter vivos trust is a trust that is not a testamentary trust, and a testamentary trust is generally created on and as a result of the death of an individual.
The 21-year rule
The T3 guide says a trust is deemed to have disposed of its capital property, land inventory and resource properties on specified dates called deemed disposition days. Apart from the spousal, joint spousal, alter ego and other trusts it lists, the guide says the day is generally 21 years after the day the trust was created, and further ones follow every 21 years on that anniversary. Paragraph 104(4)(b) of the Income Tax Act sets a day that is 21 years after the latest of the dates it lists, including the day the trust was created. Some trusts have different rules, so read the guide.
What to ask
- Which type of trust is it, and when was it created?
- Which deemed disposition day applies, and is any election on file?
- Which province’s law governs the trust deed?
See family trust and how a discretionary family trust is used in succession.
Sources
This definition is checked against primary sources. Links were last confirmed on the dates shown.
- 01Canada Revenue AgencyGovernmentT3 Trust Guide
- 02Government of CanadaGovernmentIncome Tax Act, R.S.C. 1985, c. 1 (5th Supp.)
Deavo is an advertising and listings platform, not a brokerage, law firm or valuation firm. This page is general information, not legal, tax, accounting or valuation advice, and rules differ by province. Confirm anything you rely on with a qualified professional before you act on it.