CANADA Law and Practice Contributed by: Ian M Hull, Suzana Popovic-Montag and Nick Esterbauer, Hull & Hull LLP
By contrast, Alberta, Nova Scotia and Prince Edward Island do not appear to permit private trust compa- nies that do not offer services to the public. Other provinces and territories do not specifically address private trust companies in their legislation. In jurisdic- tions without enabling legislation, establishing a pri- vate trust company may require federal incorporation under the Trust and Loan Companies Act, SC 1991, c 45 or reliance on general corporate law frameworks. 10.2 Taxation of Trusts A trust administered by a trustee who is resident in Canada will be subject to taxation in Canada only if the trustee actually exercises central management and control of the trust in Canada. A trust’s residence does not necessarily correspond to the residence of its trustee. For example, a trust will not be resident where its trustee resides if the trustee only performs administrative functions and does not have responsi- bility for broader decision-making. In Fundy Settlement v Canada , 2012 SCC 14, the Supreme Court of Canada confirmed that the resi- dence of the trustee will be the residence of the trust so long as the central management and control test is met. In other words, the trustee must carry out the central management and control of the trust, and those duties must be performed where the trustee is resident. As a general rule, the residence of the person exercis- ing central management and control determines the residence of the trust. Accordingly, if the beneficiaries exercise central management and control and reside in Canada, the trusts will be considered resident in Canada. If the trust is resident in Canada, it will be subject to Canadian tax on its worldwide income. 11. Planning for Non-Traditional Families 11.1 Succession Rights and Estate Taxes for Non-Traditional Families Succession laws across Canada have evolved signifi- cantly to recognise diverse family structures.
In Canada, succession rights are not affected by whether a marriage is between individuals of the opposite sex or the same sex. However, the succes- sion rights of common-law partners vary by jurisdic- tion. In Ontario, for example, a surviving common-law partner has no succession rights under the Succes- sion Law Reform Act, RSO 1990, c S.26, even if their partner dies intestate, although they may apply for dependant support from the estate of their deceased partner. Common-law partners are also excluded from sharing in intestate succession in Nova Scotia, Prince Edward Island, New Brunswick and Newfoundland and Labrador. By contrast, intestacy rights have been extended to common-law partners in British Columbia, Alberta, Manitoba, Saskatchewan, Nunavut, the Yukon, and the Northwest Territories. Children born out of wedlock generally have the same right to inherit from a parent’s intestate estate as children born to married parents, but do not have succession rights if their parent dies leaving a will. Distinctions based on legitimacy have been abolished in most provinces, including Ontario, Manitoba, New Brunswick, Alberta, Saskatchewan, British Columbia, Newfoundland and Labrador, Nova Scotia, Prince Edward Island, and all of the territories. If a child born out of wedlock is excluded from their parent’s will, they may be able to apply for dependant support from their parent’s estate or, in British Colum- bia, bring a wills variation claim following probate. Adopted children have succession rights with respect to the estates of their adoptive parents, should they die intestate. However, adoption generally terminates succession rights with respect to the estates of their birth parents. Once an adoption order is granted, the adopted person becomes the child of their adoptive parent for all purposes, including succession, and ceases to be the child of their birth parents. An excep- tion applies where a person adopts their spouse’s child, in which case the spouse is still the child’s legal parent, meaning the child will continue to have suc- cession rights.
42 CHAMBERS.COM
Powered by FlippingBook