Graduated Rate Estates (GREs) have been created by Revenue Canada as an exception to the recent change that requires trusts to be taxed at the highest marginal rate.
A qualifying estate can claim a GRE designation and use the graduated tax rate regime for income earned by the trust after an individual’s death. GREs also reward charitable giving in a will. Charitable donations made on death or after death are no longer deemed to have been made by the deceased personally and are now deemed to have been made by the estate.
The tax credit received by the estate for a charitable donation can be used to offset either the deceased’s personal income or the income earned by the estate after the death.
Because of these changes it is important to consider using charitable donations in your will to offset tax payable to Revenue Canada.
If winding up the estate takes longer than 3 years, possibly because there is a court challenge of the will, the executor can apply for a further 2 year extension to the GRE status.
Deborah A. Todd