A preferred beneficiary is a person resident in Canada who is a beneficiary under the trust at the end of the year, and who meets one of the following conditions:
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- he or she qualifies for the disability amount for the tax year that ends the trust’s tax year; or
- he or she:
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- is 18 years or older before the end of the tax year;
- is a dependant of another individual for the tax year because of a mental or physical impairment; and
- has income for the tax year, not including income from a preferred beneficiary election, which does not exceed the dependant tax credit.
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In addition, he or she must be one of the following:
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- the settlor of the trust;
- the spouse or common-law partner, or former spouse or common-law partner, of the settlor of the trust;
- a child, grandchild, or great-grandchild of the settlor of the trust; or
- the spouse or common-law partner of a child, grandchild, or great-grandchild of the settlor of the trust