When we draft a cross-border trust, we have the flexibility to include clauses to meet your specific objectives. Depending on your goals, we could consider some of the following tax attributes:
Whether the trust will be a revocable or non-revocable for US tax purposes.
If the cross-border trust should be arranged to avoid the application of subsection 75(2) of the Income Tax Act (Canada), which may otherwise unwittingly attribute the trust income back to the settlor.
Whether the trust could be structured to be or have the option to be a Qualifying Domestic Trust (QDOT), which can provide an opportunity to limit US estate tax.
If the trust can be used as part of an estate freeze.
The trust can be arranged to avoid the additional cost and delay of probate in both Canada and the US.
In the event of incapacity, it provides a more efficient method to allow subsequent trustees to manage the property, rather than relying on the alternative procedures of power of attorney or guardianship.
A cross-border trust includes provisions which address trust and tax issues unique to both countries.
A trust set up which only considers the tax and trust consequences from one country could be thought as a domestic trust. If a domestic trust involves property or persons in both Canada and the United States (US), it will have trust and tax consequences in both countries. There are many pitfalls of ignoring cross-border considerations, and one of the biggest risks is double taxation without any reduction under the Canada-US tax treaty.
A cross-border trust includes provisions which address trust and tax issues unique to both countries.
A trust set up which only considers the tax and trust consequences from one country could be thought as a domestic trust. If a domestic trust involves property or persons in both Canada and the United States (US), it will have trust and tax consequences in both countries. There are many pitfalls of ignoring cross-border considerations, and one of the biggest risks is double taxation without any reduction under the Canada-US tax treaty.
When we draft cross-border trusts we make sure to use wording that readers from both countries will be familiar with. For example, inter-vivos trusts in the US often refer to the “grantor”, which is a term not ordinarily used in domestic Canadian trusts. By using trust wording readers from both countries understand, it improves clarity and reduces the risk of misinterpretation of the trust document.
