What Is a Testamentary Trust in Saskatchewan and When Is One Used?

You may have heard that a will can set up a trust that only begins after death. That is a testamentary trust. It can be a way to hold an inheritance for someone for a time, instead of handing it over all at once.

This article explains in plain words what a testamentary trust is, how it comes into being in Saskatchewan, and when families tend to use one. The details turn on the wording of the will, so a lawyer should review it.

This article covers the law of Saskatchewan.

What a testamentary trust is

A trust is an arrangement where someone (the trustee) holds property for the benefit of others (the beneficiaries). A testamentary trust is one created by the terms of a will. It does not exist while the person is alive. It begins only on death, and only if the will says so.

The will normally names who will be trustee, who benefits, and when and how the money is paid out. The same person is often both executor and trustee, but they are separate jobs.

How it gets started

The trust is set up by the will, and how it fits together with the executor's work depends on what the will says, so it is worth confirming with a lawyer. An executor named in a will applies to the Court of King's Bench for Letters Probate. Probate absolutely requires an interest in land registered solely in the deceased's name, while for other assets the bank or other institution decides whether it needs Letters.

Next, the executor's usual duties include identifying and valuing assets, publishing a Notice to Creditors, depositing money in an estate account, and filing tax returns. Debts of the deceased must be paid before any gifts in the will go to beneficiaries. Only what is left can fund the trust.

Where the trust is to hold land, real property must first be transferred at Information Services Corporation (ISC) into the personal representative's name before it can go further. How the property then reaches the trustee depends on the will and on professional advice.

When families use one

There is no single rule for when a testamentary trust makes sense. Common situations include these.

• A beneficiary is under 18 or a dependent adult. A Notice to the Public Guardian and Trustee (Form 16-12) is required if any beneficiary is under 18 or a dependent adult, and a land sale involving minors needs extra consents. A trust can keep that money managed over time.
• A family member has a disability and may need support over many years. Adult children unable to support themselves due to disability count as dependants who can claim if a will makes inadequate provision.
• You want gifts paid out in stages, not in one lump sum.
• A second marriage or blended family, where you want to provide for one person and protect something for others.

A trust adds administration and cost, so it is not right for every family. A lawyer can weigh it against simpler gifts.

Tax and reporting

Income the estate earns after death is reported on a T3 trust return, and a graduated rate estate can choose any year-end up to one year after death. A T3 return for the estate is due 90 days after the estate's year-end.

Separately, the deceased's final income tax return is due on April 30 of the following year for deaths between January 1 and October 31, or six months after death for deaths between November 1 and December 31. An executor who distributes assets before getting a CRA clearance certificate can be held personally liable, up to the value of what was distributed, if tax is still owing. How a trust is taxed over the longer term is best confirmed with an accountant.

What to do next

• Read the will to see whether it actually creates a trust and who the trustee is.
• Ask whether the trustee is willing and able to take on a long-term role.
• List the beneficiaries and note anyone under 18 or a dependent adult.
• Ask an accountant about the T3 return and the clearance certificate.
• Speak with a lawyer about how the executor should proceed.

Frequently asked questions