Taxation of Trusts and Estates (Pustogorodsky)
PREREQUISITE: There are no prerequisites for this course. However, to obtain the full benefit from the course knowledge of trust law and corporate taxation will be useful.
COURSE CONTENT: This course deals with the following topics:
- tax ramifications arising on the death of a taxpayer
- taxation of estates
- taxation of personal trusts
- principles of inter vivos and testamentary estate planning
- various anti-tax avoidance rules affecting estate planning
- the reorganization of private corporations as part of inter vivos and testamentary estate planning
- the ethical issues that can arise in estate planning
Special emphasis will be placed on the taxation of trusts and their use in tax planning by individuals and First Nations. The tax traps to be avoided when creating inter vivos or testamentary trusts will also be reviewed. The intention is to impart as much practical knowledge as possible and to prepare students for practice.
Through the use of concrete examples, students will be shown that planning is organic. A clause in a shareholders agreement may adversely affect tax planning in a will or setting up a trust for the benefit of children may adversely affect the tax rate payable by a group of corporations. Planning requires a holistic approach to providing legal services to a client. Planning also requires an understanding of the human dynamics in which the product of the planning will be placed.
Students will also be introduced to the ethical challenges they will encounter as the result of pressure from clients or from their other advisors, both in planning and implementing various transactions. Ways of dealing with these challenges will be canvassed so that the needs of both the clients and the Law Society can be met.
DEGREE OF DIFFICULTY: The subject matter is conceptually difficult. There is a significant amount of reading required. The workload increases toward the end of term, at which time at least an hour of work may be required outside of class, for each hour of class. The course concepts are cumulative, in that an
understanding of concepts taken later in the course requires an understanding of concepts taken earlier.
PRACTICAL IMPORTANCE: Every practitioner whose practice will include estate work, the preparation of wills, inter vivos trusts and the incorporation of private corporations and giving advice to their owners will benefit from being familiar with the topics covered in this course. Although the basic emphasis is on certain areas of income tax law, the course will substantially supplement a student’s understanding and knowledge of trust law, the law applying to the taxation of shareholders of private corporations, the preparation of wills and estate planning. Recent amendments to the Income Tax Act introduced in 2014 and in 2017 drastically changed estate planning for shareholders of private corporations and the use of inter vivos and testamentary trust. Much of what has been done in the past in the way of estate planning can no longer be done without adverse tax consequences. This new planning regime has made many wills, estate freeze and trusts precedents dangerously obsolete. Students who take this course will know what they will have to revise in office precedents when documenting their clients’ estate planning.