What is a personal trust?

A personal trust is a legal arrangement that arises when a settlor transfers property to a trustee to hold and administer for the exclusive benefit of the beneficiaries.

Settlor: the person who sets up the trust and makes the initial transfer of the property to the trustee.

Trustee: the person or institute that holds the formal legal title of the property and manages the assets.

Beneficiaries: The personal who benefit from the property that is held in the trust, such as an interest in the income from the property, the capital value of the property, or both.

It is possible for more than one of these three roles to be played by a single individual. For example, a mother can be the settlor of a trust in favour of her children and also serves as the trustee.

Tax on trust

Although a trust is not a separate entity from legal perspective, it is deemed to be an individual in the Income Tax Act. That means a trust has to file a separate income tax return to report taxable income and tax payable.

Year end of a trust

Additional information