The Federal Government introduced their 2014 budget this week. It was somewhat a dull budget. No big changes were introduced. There is one major change proposed that affect Estate Planning. Below is also a link to Jamie Golombeck’s summary of the proposed financial changes. It is a quick read and well worth the time.
Elimination of the Graduated Rate Taxation of Trusts and Estates
Trust set up in a Will benefit from the graduated taxation just like a regular tax payer. This is a major estate planning tool that will see some changes with these proposed new measures. Specifically, Budget 2014 proposes to apply flat top-rate taxation to grandfathered inter vivos trusts, trusts created by will and certain estates. Two exceptions to this treatment are proposed.
First, graduated rates will continue to apply for the first 36 months of an estate that arises on and as a consequence of an individual’s death and that is a testamentary trust. For estates which remain in existence beyond 36 months after death, flat top-rate taxation will apply at the end of that 36-month period. That is the big change.
Second, graduated rates will continue to be made available with respect of such trusts having as their beneficiaries individuals who are eligible for the Federal Disability Tax Credit. This is good news for parents with a disabled child.