A testamentary trust is a trust created through the instructions in a person’s will. It comes into effect upon death and is used to hold and distribute estate assets according to specific terms.
How a Testamentary Trust Works
A trustee manages assets on behalf of named beneficiaries according to the will’s terms. The trust may hold assets for years before distributing them. For the first 36 months after death, it qualifies as a Graduated Rate Estate taxed at graduated personal income tax rates rather than the flat top rate.
Why It Matters in Retirement
Particularly useful for Canadians with a disabled beneficiary (Henson Trust), a surviving spouse in a second marriage, minor children, or a beneficiary who cannot manage money independently. The GRE tax benefit can also provide meaningful savings on estate income.
Related Resources
This article provides general financial education for Canadians. It is not personalized financial advice. For guidance specific to your situation, consider speaking with a CFP professional.