Introduction of a clause in trust agreement allowing a replacement trustee in the case of mental incapacitation or death did not constitute a resettlement of the trust.

AMENDING A TRUST AGREEMENT

In a 2019 Advance Income Tax Ruling (2017-0722381R3), a trustee sought to amend the trust agreement to allow for:

  • the appointment of the trustee’s spouse as a replacement trustee in the event of his passing or mental incapacitation;

  • the appointment of a third party as trustee in the event of both his and his spouse’s passing or mental incapacitation; and

  • the ability to insert a protector who would only be able to replace an appointed trust company (as the replacement trustee) with another.

The trust permitted amendments at any time while the settler was alive provided that they were approved by him, and that they did not change the beneficiaries (or their interest) and/or the person entitled to appoint trustees.

CRA ruled that these amendments would not result in the resettlement of the trust or a disposition by the trust of its property. Further, they would not result in a disposition by any beneficiary of their interest.

For further information see Video Tax News Monthly Tax Update Newsletter, Issue No. 456.