A testamentary trust is a trust or estate that is generally created on the day a person dies. All testamentary trusts are personal trusts. The terms of the trust are established by the will or by court order in relation to the deceased individual’s estate under provincial or territorial law.
Unlike an inter vivos trust, a testamentary trust is taxed at graduated rates like individuals. But soon the advantage may be taken away. The government formally launched a consultation paper that will likely lead to the elimination of the graduated tax rate system for testamentary trusts and estates. The Department of Finance is seeking input from interested parties no later than December 2, 2013.