Trust Income Tax:
Accountants in Montreal
Just as individuals or companies do, a trust must meet tax obligations. Among other things, it must register with Revenu Québec and file annual income tax returns.
Do you own a trust and would you like to rely on professionals to file its returns? EB Conseil Fiscal inc. offers you its tax income services for trusts. Our team has over 20 years of experience in accounting and tax management for individuals, businesses, and trusts.
Our tax specialists and chartered professional accountants will be pleased to advise you on trust income tax matters and to carry out all the necessary tax procedures.
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Tax Return for Trusts
A trust is a contract that frames a transfer of assets. It defines who the beneficiaries are and sets out conditions for the transfer. To ensure that these conditions are met, the trust is administered by a trustee.
In other words, trusts are like companies but managed by someone other than their owner. Like a company, it also has its characteristics, a separate estate, and can invest or make contracts with third parties.
The trust is a legal relationship that generally includes 3 parties:
- A settlor: the person who establishes the trust and transfers assets. He/she gives the directives as to the use of the assets or the management of the estate. Finally, the person designates the beneficiaries.
- A trustee: the person appointed to control and manage the assets.
Beneficiaries: the persons who are designated to receive the wealth or assets managed by the trustee.
Any trust established in Quebec must register with Revenu Québec. To do so, it must first apply for an identification number. As a separate tax entity, it must then file tax returns with federal and provincial institutions.
In Quebec, the trust must also fill out the RL-16 Slip to report the amounts received by each beneficiary. Income tax returns for a trust are usually due no later than 90 days after the end of the taxation year.
The administration of a trust must respect these different obligations and be aware of those that apply to its category. The team at EB Conseil Fiscal Inc. can assist you in managing the taxes of all types of trusts.
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Trust Income Tax
Taxation of Testamentary Trusts
A testamentary trust is a personal trust that is created by a will or estate. The terms of this type of trust are set out in a will and are put in place upon the death of the settlor.
Generally, the estate ceases to exist once the assets are distributed to the beneficiaries. If any assets have not been distributed, they remain in the trust which will then manage the estate.
The income tax rate on testamentary trusts is progressive. Called the Graduated Rate Estate (GRE), it works as follows:
- Gradual increase for the first 36 months after death;
- Marginal tax rate the rest of the time, if the trust is maintained.
Taxable income splitting is available for the amount retained during the 36 months after death. The tax payment date of the trust is the beneficiaries’ choice for the first 36 months. Thereafter, they are required to file their return on December 31st of each year.
Trust Income Tax
Taxation of Inter Vivos Trusts
Unlike a testamentary trust, an inter vivos trust’s purpose is the management of assets during life.
Inter vivos trusts are particularly beneficial for tax and financial planning.
For federal and provincial tax purposes, this trust is considered a separate person with obligations.
From a tax point of view, the inter vivos trust must therefore file an income tax return with a December 31 year-end. Its tax rate is marginal.
Other criteria and tax rules surround the rights and obligations of trusts, whether testamentary or inter vivos. Our chartered accountants and tax professionals can help you navigate through each of these steps.
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File your Trust Income Tax with Peace of Mind
At EB Conseil Fiscal Inc. our tax professionals can help you file your trust income tax return. We have an in-depth knowledge of the tax standards and rates in effect for each type of trust.
Take advantage of our expertise so you file your trust taxes on time and avoid any penalties. In addition, our tax specialists can advise you on the most advantageous practices to reduce your taxes on capital gain and optimize your wealth management.
Contact us to discuss your needs and to obtain personalized advice on the tax management of your trust.