Estates & Trusts 2021 Updates
By Jennifer Stebbing & Jaclyn Gates
the beginning of the New Year, there are several updates and changes coming
into effect that Estates and Trusts lawyers ought to keep in mind and implement
into their practice.
1. New Trust
Beginning in 2021, new reporting rules have come
into effect for most trusts. The rules are intended to improve the collection
of beneficial ownership information with respect to trusts and to help CRA
assess the tax liability for trusts and its beneficiaries. Trustees and their
advisors should be aware of the rules summarized below.
(a) New Filing Requirement
Prior to 2021, a trust was only required to file a
T3 Trust Income Tax and Information Return for a given year if it was active
(by having tax payable or having made distributions during the year). A trust
that has no tax payable or that had not distributed income or capital during
the year was not generally required to file a T3 return. The new reporting and
disclosure requirements apply to express trusts resident in Canada even if they
were inactive or had no income during the year. The new rules mean that a trust
that may not have previously had to file a T3 return, may now be required to do
For example, trusts used to hold a cottage, U.S.
residence or vacation home, as well as trusts used to hold private company
shares as part of an estate freeze, are trusts which have no income and
previously did not file a tax return. These types of trusts are caught by the
new rules and will now have to file a tax and information return.
(b) New Annual Information Reporting Requirement
The new reporting requirement applies to all trusts
that are required to file a T3 return. Beginning in 2021, and every subsequent year
during the trust’s existence, the trustees must provide the name, address, date
of birth, residence and taxpayer identification number for all of the following
persons in relation to the trust:
all current trustees;
all beneficiaries (including contingent
any person who has the ability (through the trust
terms or a related agreement) to exert control over trustee decisions regarding
the appointment of income or capital of the trust (such as a protector).
This information will be filed in a new schedule to
the T3 return.
Exceptions to the New
The following trusts are exempt from the new filing
and reporting requirements:
- trusts in existence for less than three months
at the end of 2021;
- trusts that hold assets with a total fair
market value that does not exceed $50,000 throughout the year if their
holdings are confined to deposits, government debt obligations and listed
- certain regulated trust accounts, such as a
lawyer’s general trust account;
- trusts that qualify as a registered charity or
- mutual fund trusts, segregated funds and
- graduated rate estates and qualified
- employee life and health trusts;
- certain government funded trusts;
- trusts under or governed by registered plans
such as RRSPs, RESPS, RRIFs and TFSAs; and
- cemetery care trusts and trusts governed by
eligible funeral arrangements.
(d) Penalties for Non-Compliance
Failure to file the T3 return or provide the schedule
of additional information comes with penalties. If a tax payer knowingly fails
to disclose, or if there is gross negligence, the penalty is the greater of
$2,500 or 5% of the highest fair market value of the trust’s assets.
Existing penalties in respect of the T3 return will
continue to apply.
Trustees should begin gathering the
necessary information now to avoid being caught without the ability to provide
the required information at the end of the 2021 taxation year should
beneficiaries be difficult to locate or uncooperative.
Where appropriate, trustees should
consider winding up trusts, such as those that are redundant or no longer serve
a purpose, to avoid having to comply with the new requirements.
Trustees ought to seek professional
advice to ensure that their obligations are met.
Virtual Signing of Wills and Powers of Attorney
Pursuant to Ontario Regulation 458/20: Extensions of Orders, the virtual
signing of Wills and Powers of Attorney provided for under Ontario Regulation 129/20: Signatures in Wills and Powers of Attorney has
been extended until January 20, 2021 in Ontario.
Ontario Regulation 129/20 provides
requirement pursuant to the Succession
Law Reform Act for a testator or witness to be present or in each other’s
presence for the making of a Will (or a Power of Attorney) may be satisfied by
means of audio-visual communication technology, with certain restrictions.
communication technology” means any electronic method of communication in which
participants are able to see, hear and communicate with one another in real
least one person who is providing services as a witness must be a licensee
within the meaning of the Law Society Act
at the time of the execution of the Will (or Power of Attorney).
signatures may be made by signing complete, identical copies of the Will (or
Power of Attorney) in counterpart, which together shall constitute the Will (or
Power of Attorney).
this purpose, copies of a Will (or Power of Attorney) will be considered
identical even if there are minor, non-substantive differences in format or
layout between the copies.
Changes to the Rules of Civil Procedure and Updated Court Forms
On November 30, 2020, the Attorney
General of Ontario announced changes to the Rules
of Civil Procedure (the “Rules”) effective January 1, 2021. The key changes
impacting the Estates and Trusts practice include:
by Email- The changes to the Rules allow
for service of documents (other than originating documents) by email and allows
court staff to communicate and send certified court documents by email.
Hearings- Due to the COVID-19 pandemic, hearings have been successfully
conducted by videoconference for months. The changes to the Rules encourage videoconference as the
predominant way to conduct court attendances. The Rules will now impose cost consequences for any party who objects
to a virtual attendance without good reason.
Commissioning- In person commissioning of affidavits is no longer required. In
accordance with the Commissioners for
Taking Affidavits Act, the Rules now
recognize that this authentication process can be achieved through the use of
any electronic method of communication that enables the commissioner and the
deponent to see, hear, and communicate with each other in real time.
These changes to the Rules have also resulted in necessary
revisions to the Rules of Civil Procedure
court forms to allow for service via email and remote commissioning, including
the following estate administration forms:
74.06- Affidavit of Service of Notice (Certificate of Appointment of Estate
Trustee with a Will), effective January 8, 2021
74.07- Notice of an Application for a Certificate of Appointment of Estate
Trustee with a Will, effective January 8, 2021
74.08- Affidavit of Execution of Will or Codicil, effective January 1, 2021
74.09- Affidavit Attesting to the Handwriting and Signature of a Holograph Will
or Codicil, effective January 1, 2021
74.10- Affidavit of Condition of Will or Codicil, effective January 1, 2021
74.16- Affidavit of Service of Notice (Certificate of Appointment of Estate
Trustee without a Will), effective January 8, 2021
74.17- Notice of an Application for a Certificate of Appointment of Estate
Trustee without a Will, effective January 8, 2021
74.34- Registrar’s Notice to Estate Trustee Named in a Deposited Will of
Application for Certificate of Appointment of Estate Trustee with a Will,
effective January 8, 2021
74.35- Registrar’s Notice to Estate Trustee Named in a Deposited Will of
Application for Certificate of Appointment of Estate Trustee without a Will,
effective January 8, 2021
Jennifer Stebbing is a Partner with
Ross & McBride LLP and practices predominantly in the area of estate
planning, administration and accounting. She is an LSO Certified Specialist in
Estates & Trusts law.
She can be reached at:
Ross & McBride LLP
1 King St W, 10th Floor