What is a qualified disability trust and how does my disabled child qualify as beneficiary?

A qualified disability trust, or QDT, is a testamentary trust that's allowed to keep using graduated tax brackets instead of being taxed at the top marginal rate the way most trusts are. It's one of the narrow exceptions left after the 2016 rule change that put nearly all other testamentary trusts on the flat top-rate regime.

To qualify, the trust must be a testamentary trust created on someone's death, and at least one beneficiary named in the joint election for that tax year must be an individual eligible for the disability tax credit. Your child would generally need a valid Disability Tax Credit Certificate on file with the CRA — the same eligibility used for the personal disability tax credit — for the trust to make the QDT election naming them as the qualifying beneficiary.

Because the benefit only applies for years the joint election is filed and the beneficiary remains DTC-eligible, families planning a trust for a disabled child should coordinate the DTC application and the trust's tax filings together, and confirm eligibility is still current each year the election is made, rather than assuming approval carries forward automatically once granted.