Written by Ron Cooke, President & Founder of Strategic Wealth Protection Partners in Ontario
How are trusts taxed in Canada?
In Canada, trusts are generally taxed at the highest marginal tax rate for individuals unless they qualify as graduated rate estates (GREs) or certain other exceptions.
This means income retained in the trust is taxed heavily, but income distributed to beneficiaries is taxed at their individual rates. Trusts must file annual tax returns, and proper planning can help manage the tax burden effectively.
How are trusts taxed in Ontario?
In Ontario, the taxation of trusts aligns with federal rules.
Trusts are taxed at the highest marginal tax rate unless they meet specific criteria, such as being a graduated rate estate or a qualified disability trust. Beneficiaries in Ontario who receive income from a trust include it on their personal tax returns and are taxed at their applicable rates, which can provide tax savings compared to retaining income in the trust.
Learn about the cost of a living trust in Canada HERE >
What are the tax benefits of having a trust in Canada?
A trust can provide tax benefits by allowing income to be distributed to beneficiaries in lower tax brackets, reducing the overall family tax burden.
Certain trusts, like spousal trusts or alter ego trusts, can defer taxes until the death of the spouse or settlor. Additionally, trusts can help avoid probate fees, protect assets, and create opportunities for income splitting, all of which contribute to efficient estate planning.
How can a trust be used for estate planning in Canada?
Trusts are a powerful tool for estate planning in Canada.
They allow you to control the distribution of your assets, protect family wealth, and minimize taxes. Trusts can bypass probate, maintain privacy, and ensure that assets are managed responsibly for beneficiaries, such as minors or those with special needs.
By working with professionals, you can customize a trust to meet your unique goals and provide long-term security for your loved ones.
Avoid Ontario’s Hefty “Death Tax”
While Ontario doesn’t have a direct estate tax on your total net worth, income tax on capital gains and deemed dispositions can have a significant impact on your estate.
These taxes can dramatically reduce the wealth you pass on to your loved ones.
For instance, assets like real estate (excluding your principal residence) and non-registered investments are deemed sold at fair market value upon death. The resulting capital gains are usually taxed at Ontario’s highest marginal tax rate, which exceeds 53.53% (2024).
Here’s an example: If you have an RRSP or RRIF worth $1,000,000, the government could take $535,000 in taxes upon your death. That’s more than half of your hard-earned savings—gone to taxes, not your family. And that’s before factoring in additional costs like probate fees, executor fees, legal fees, and accounting fees. What will be left for your family?
Did you know that some of your assets may even face double taxation? Without proper planning, the total financial burden on your estate could be staggering.
Discover the Benefits of a Living Trust in Ontario
Are you an Ontario resident considering a living trust as part of your estate planning?
At Strategic Wealth Protection Partners, we’re here to guide you through every step of the process with expert advice and personalized support. Begin your estate planning journey today with a Living Estate Plan Consultation from our experienced team.
Our mission at SWPP is to help you create an estate plan that secures your legacy, shields your assets from unnecessary taxation, and ensures your loved ones are cared for. By designing a living trust tailored to your goals, our experts will help you build a plan that truly reflects your values and priorities.
Take control of your future—start planning today!
Schedule a Living Estate Plan Consultation
Planning your legacy is about more than numbers—it’s about ensuring your family remembers you and your values are honoured for many years to come.
Estate planning and trusts can feel overwhelming, especially if it’s your first time. That’s why we’re here.
With our simple, 5-Step Living Estate Plan, we make the process easy, helping you create a comprehensive estate plan or trust that protects your assets from taxes and probate fees while preserving your legacy. Tools like The Final Word Journal capture your story, wishes, and essential details like accounts and end-of-life plans, ensuring your family has clarity and comfort.
Take the first step today—schedule a consultation call and give your family the ultimate gift: peace of mind and the assurance they were always your priority.
Read More
If you’re starting your estate planning process, you may find these articles helpful:
- Is a Living Trust Better than a Will in Canada?
- Why the ‘death binder’ is becoming an essential part of estate planning
- How to Create a Living Trust in Canada
About the Author
RON COOKE, PRESIDENT & FOUNDER OF STRATEGIC WEALTH PROTECTION PARTNERS
With over 30 years in financial services, I’ve seen the challenges families face when a loved one passes—lost assets, unnecessary taxes, and emotional stress. That’s why I created the Living Estate Plan, a comprehensive process to protect assets, eliminate estate and probate fees, and create legacies that are remembered for many years to come.
This plan ensures your family receives not just your wealth, but a meaningful reminder of your care and love. Tools like The Final Word Journal capture your story, wishes, and essential details, offering clarity and comfort during difficult times.
Your final gift should be more than money—it should be peace of mind, cherished memories, and an organized estate.
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Schedule a 30-minute consultation call with Strategic Wealth Protection Partners. Click HERE to schedule a consultation.
