Category: Wills, Estates, and Trusts

Last month, the Federal Court of Appeal, in Antle v Canada, 2010 FCA 280 [Antle 2010], upheld the Tax Court of Canada decision in Antle v. The Queen, 2009 TCC 465 [Antle 2009], finding that an offshore spousal trust was not valid. Both courts agreed that the primary purpose of the spousal trust was to avoid capital gains taxes. The Tax Court of Canada considered two main issues: whether the trust was valid and if the General Anti-Avoidance Rule (“GARR”) was applicable to deny the transactions and related tax savings. Sona Dhawan discussed the Tax Court decision in an earlier...

Offshore trusts have become an essential element of successful tax planning. Trusts are used as tax planning vehicles as they are considered a separate legal entity from the individual. Thus, the income and assets of the trust are excluded from the individual’s estate for tax purposes. A previously successful, but now uncertain, strategy had used the residence of trust as basis for evading taxes. The Canada Revenue Agency has taken the position in Interpretation Bulletin IT-477 “Residence of a Trust or Estate” (dated May 30, 1980) that a trust will generally be resident in the jurisdiction where the trustee who...

Offshore trusts are major tax-planning and estate-planning tools which can be used to protect assets from taxation and to defer accrued capital gains for a long term. For all such planning tools to work, however, the “offshore” aspect of the trust—that is to say its non-Canadian residence—has to be a central feature of the structure. A trust resident in Canada would be subject to Canadian income tax on its worldwide income. The established common law principle for determining the residence of trusts is that a trust is resident in the jurisdiction where its trustees reside and operate (Trustees of the...