New income tax rules have been introduced that will mean more onerous reporting requirements for Family Trusts in 2021. The government feels that there has been a lack of transparency and reporting in the administration of trusts, and are now requiring mandatory reporting on the details of these trust and the people involved in them.
If you have a Family Trust, you will be required to provide more information about your trust starting next year. Also, for trusts that have had no obligation to report in the past, because they had no income to declare, will now be required to file a trust income tax return, regardless of income.
Under the new reporting requirements, you will be obligated to disclose name, address, date of birth and tax identification number of the individuals involved in the trust. These requirements raise certain privacy concerns, but there are potential practical difficulties as well.
When a trust is created, you require someone to contribute the first asset into the trust; this is called ‘settling the trust’, and the person who gives the asset is called the ‘Settlor’. The Settlor is generally a family friend who will gift something, such as a gold coin, or a $20 bill, in order to get the trust started. In many cases, that is the full extent of the Settlor’s involvement. Depending on how old the trust is, many people may have lost contact with the Settlor of their trust.
The new reporting requirements may also affect how you choose which Beneficiaries to include in your Family Trust. If a group of beneficiaries (ie. grandchildren) is a particularly large group, and even if the Trustees do not intend to pay funds out of the trust to these beneficiaries any time soon, if ever, it will still be mandatory to collect and report the private information of all the included individuals. This can become quite an onerous task.
If your trust is nearing it’s 21st anniversary, or even if you find you no longer have much use for your Family Trust, now is a good time to touch base with your lawyer or your accountant to discuss if now is the right time to amend or wind up your Family Trust in 2020, before the new rules come into place.
FH&P Lawyers LLP Welcomes Tanvir Gill to the Firm
Originally from Surrey, B.C. Tanvir obtained her Bachelor of Arts degree from Simon Fraser University before attending law school at Thompson Rivers University in Kamloops. She obtained her law degree in 2018 and completed her articles with a local firm. Tanvir was called to the Bar in 2019 and joined FH&P as an associate in July 2020. Tanvir is building a practice with a focus on residential and commercial real estate, business law and wills and estates. She is fluent in both Punjabi and Hindi. Outside of the office, Tanvir enjoys taking advantage of all that the Okanagan Valley has to offer, whether that means visiting her favourite wineries, paddle boarding or snowboarding at Big White in the winters.
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