Testamentary Trust Declaration (Canada)
This Testamentary Trust Declaration (the "Declaration") is made on [Date] by [Testator Name], of [Testator Address], [Testator City], [Testator Postal Code], in the Province of [Province], Canada (the "Testator").
RECITALS
A. The Testator wishes to establish a testamentary trust (the "Trust") to be created under and pursuant to the Testator’s Last Will and Testament. This Trust shall come into existence upon the Testator’s death and shall be funded from the Testator’s estate.
B. This Declaration sets out the terms and conditions governing the administration and distribution of the Trust, which shall be incorporated by reference into the Testator’s Last Will and Testament.
C. The Testator has testamentary capacity and is making this Declaration freely and voluntarily, without undue influence, and with a full understanding of its nature and consequences.
D. This is a [Trust Type] testamentary trust. A testamentary trust is a trust that arises on and as a consequence of the death of an individual, as defined in the Income Tax Act (Canada) s. 108(1). The Trust must comply with the filing requirements under the Income Tax Act, including the annual T3 Trust Income Tax and Information Return, and the enhanced trust reporting rules effective for taxation years ending after December 30, 2023.
NOW THEREFORE, the Testator declares and directs as follows:
1. ESTABLISHMENT OF TRUST
1.1 Creation. Upon the Testator’s death, the Estate Trustee (Executor) shall establish a testamentary trust to be known as "[Trust Name]" (the "Trust"). The Trust shall come into existence immediately upon the Testator’s death and shall continue in accordance with the terms set out in this Declaration.
1.2 Funding. The Trust shall be funded with the following property from the Testator’s estate: [Funding Source]. The trust property shall consist of: [Trust Property]
1.4 Nature of Trust. This Trust is a testamentary trust as defined in the Income Tax Act (Canada) s. 108(1). It is not an inter vivos trust and was not created during the Testator’s lifetime. The three certainties required for a valid trust under Canadian common law are present: certainty of intention, certainty of subject matter, and certainty of objects.
2. TRUSTEE APPOINTMENT
2.1 Initial Trustee. The Testator appoints [Trustee Name], of [Trustee Address] ([Trustee Relationship]), as the initial Trustee of this Trust (the "Trustee"). The Trustee shall assume their duties immediately upon the Testator’s death and the establishment of the Trust.
2.2 Successor Trustee. If the initial Trustee is unable or unwilling to serve, or ceases to serve by reason of death, incapacity, resignation, or removal, [Successor Trustee Name], of [Successor Trustee Address], shall serve as Successor Trustee with all the rights, powers, and obligations of the initial Trustee.
2.3 Resignation. The Trustee may resign by providing sixty (60) days’ written notice to all adult beneficiaries and to the guardians of any minor beneficiaries. The resignation shall not take effect until a successor trustee has been appointed and has accepted the trusteeship.
2.4 Removal. The Trustee may be removed by the unanimous written consent of all adult beneficiaries who are entitled to receive income or capital from the Trust, or by order of a court of competent jurisdiction in the Province of [Province].
3. BENEFICIARIES
3.1 Primary Beneficiaries. The beneficiaries of this Trust are: [Primary Beneficiaries]
3.2 Contingent Beneficiaries. In the event that any primary beneficiary predeceases the Testator or is otherwise unable to receive their share: [Contingent Beneficiaries]
4. DISTRIBUTION OF TRUST PROPERTY
4.1 Income Distribution. [Income Distribution]. The Trustee shall maintain separate accounts for income and capital of the Trust.
4.3 Capital Distribution. The capital of the Trust shall be distributed to the capital beneficiaries as follows: [Capital Distribution]. The specific distribution terms are: [Distribution Details]
4.4 Capital Encroachment. The Trustee may, in the Trustee’s absolute discretion, pay, transfer, or apply all or any part of the capital of the Trust to or for the benefit of any one or more of the beneficiaries as the Trustee considers advisable for the maintenance, education, advancement, or benefit of such beneficiary, having regard to the needs and circumstances of all beneficiaries.
5. TRUSTEE POWERS AND DUTIES
5.1 Fiduciary Duties. The Trustee shall act in good faith and in the best interests of the beneficiaries. The Trustee owes the beneficiaries the fiduciary duties recognized at common law and under the applicable provincial Trustee Act, including the duty of loyalty, impartiality among beneficiaries, prudent investment, and proper accounting.
5.2 Powers. Without limiting the powers conferred by the applicable provincial Trustee Act and the common law, the Trustee shall have the following powers: [Trustee Powers]
5.3 Prudent Investment. The Trustee shall exercise the care, skill, diligence, and judgment that a prudent investor would exercise in making investments, considering the purposes, terms, and distribution requirements of the Trust, as required by the provincial Trustee Act and the Prudent Investor Rule.
5.4 Accounting. The Trustee shall maintain accurate records of all trust transactions and shall provide an annual accounting to all adult beneficiaries and to the guardians of minor beneficiaries. The accounting shall include a statement of all income received, capital gains and losses, expenses paid, distributions made, and a current inventory of trust assets with estimated market values.
6. TRUSTEE COMPENSATION AND EXPENSES
6.1 Compensation. [Trustee Compensation]. [Custom Compensation]
6.2 Expenses. The Trustee shall be entitled to reimbursement from the trust property for all reasonable and necessary expenses incurred in the administration of the Trust, including legal fees, accounting fees, investment advisory fees, property management costs, tax preparation fees, and T3 filing costs.
7. TAX PROVISIONS
7.1 T3 Filing. The Trustee shall file a T3 Trust Income Tax and Information Return with the Canada Revenue Agency for each taxation year of the Trust, as required by the Income Tax Act (Canada). The taxation year of this testamentary trust shall end on December 31 of each year, unless the Trust qualifies as a Graduated Rate Estate (GRE) within the meaning of ITA s. 248(1), in which case the Trustee may select an off-calendar year-end for a period not exceeding 36 months from the Testator’s death.
7.2 Graduated Rate Estate. The Testator’s executor is authorized and directed to designate the estate as a Graduated Rate Estate (GRE) under ITA s. 248(1) if eligible, in order to benefit from graduated tax rates for a period of up to 36 months after the Testator’s death. The Testator’s Social Insurance Number must be provided in the estate’s T3 return, and the estate must be designated as the GRE of the Testator.
7.3 21-Year Deemed Disposition. The Trustee and beneficiaries acknowledge that under ITA s. 104(4), the trust property is deemed to be disposed of at fair market value every 21 years from the date the Trust was created, which may trigger capital gains tax. The Trustee shall plan for this deemed disposition and may distribute trust property to beneficiaries before the 21-year anniversary to minimize tax consequences.
7.4 Tax Elections. The Trustee is authorized to make any tax elections available under the Income Tax Act, including the preferred beneficiary election under ITA s. 104(14), the designation of taxable capital gains under ITA s. 104(21), and the spousal rollover election under ITA s. 70(6) (if applicable), in order to minimize the overall tax burden on the Trust and its beneficiaries.
7.5 Enhanced Reporting. The Trustee shall comply with the enhanced trust reporting rules under the Income Tax Act, as amended, which require the Trust to report the identity of all trustees, beneficiaries, settlors, and any person who has the ability to exert influence over trustee decisions regarding the appointment of income or capital of the Trust. This information must be reported annually on the T3 return.
8. TERMINATION
8.1 Termination. This Trust shall terminate upon the earliest of: (a) the distribution of all trust property to the beneficiaries in accordance with this Declaration; (b) the date that is twenty-one (21) years after the death of the last surviving beneficiary who was alive at the date of the Testator’s death (the common law perpetuity period); (c) the 21-year deemed disposition date under ITA s. 104(4), if the Trustee determines that termination and distribution is in the best interests of the beneficiaries; or (d) as otherwise ordered by a court of competent jurisdiction.
8.2 Final Distribution. Upon termination, the Trustee shall distribute all remaining trust property to the beneficiaries entitled thereto, after paying or providing for all outstanding debts, taxes (including any tax arising from the deemed disposition under ITA s. 104(4)), and expenses of the Trust.
9. ADDITIONAL PROVISIONS
9.1 [Additional Provisions]
10. GENERAL PROVISIONS
10.1 Governing Law. This Declaration and the Trust created hereunder shall be governed by and construed in accordance with the laws of the Province of [Province] and the applicable federal laws of Canada, including the Income Tax Act (Canada).
10.2 Severability. If any provision of this Declaration is held to be invalid, illegal, or unenforceable, the remaining provisions shall continue in full force and effect.
10.3 Incorporation into Will. This Declaration shall be incorporated by reference into the Testator’s Last Will and Testament and shall form part of the Testator’s testamentary instructions. In the event of any conflict between this Declaration and the Will, the terms of the Will shall prevail.
IN WITNESS WHEREOF, the Testator has executed this Testamentary Trust Declaration as of the date first written above.
Testator
________________
Signature
Trustee (Acceptance)
________________
Signature
What Is a Testamentary Trust Declaration (Canada)?
A Testamentary Trust Declaration in Canada creates a trust that arises under a will to hold and manage estate assets for named beneficiaries after death, governed primarily by provincial succession and Trustee legislation. It directs the distribution of the testator's estate to named beneficiaries upon death.
Under Canadian law, testamentary trusts are defined in the Income Tax Act (Canada) s. 108(1) as trusts that arise on and as a consequence of the death of an individual. Since the 2016 amendments to the Income Tax Act, testamentary trusts are generally taxed at the top marginal rate, eliminating the previous advantage of graduated rates. However, the Graduated Rate Estate (GRE) designation under ITA s. 248(1) allows a deceased’s estate to benefit from graduated tax rates for up to 36 months after death, provided the estate meets specific criteria including providing the deceased’s Social Insurance Number and designating itself as the GRE.
Testamentary trusts serve several critical estate planning purposes in Canada. A spousal trust under ITA s. 70(6) allows capital property to roll over to the trust at the deceased’s adjusted cost base, deferring capital gains tax. A Henson Trust (absolute discretionary trust) protects disabled beneficiaries’ eligibility for provincial disability benefits like ODSP (Ontario), PWD (British Columbia), and AISH (Alberta), as confirmed by the Supreme Court of Canada in S.A. v. Metro Toronto Community Services (2006 SCC 27). Trusts for minor children allow assets to be managed professionally until the children reach specified ages, protecting them from receiving large inheritances before they are mature enough to manage them. The trust is governed by the provincial Trustee Act (e.g., Ontario Trustee Act R.S.O. 1990, c. T.23; BC Trustee Act R.S.B.C. 1996, c. 464) and the Wills Act of the Testator’s domicile.
The legal framework governing the Testamentary Trust Declaration (Canada) in Canada draws on several key statutes and regulatory bodies. Under Canadian law, PIPEDA and provincial privacy legislation govern personal data processed under this agreement. The Competition Act (R.S.C. 1985, c. C-34), enforced by the Competition Bureau, protects consumer rights. Section 15 of the Canada Business Corporations Act governs corporate obligations. Provincial superior courts and the Federal Court of Canada have jurisdiction for civil matters. The Canada Revenue Agency (CRA) administers tax compliance obligations. Parties executing a Testamentary Trust Declaration (Canada) in Canada should confirm the document reflects current law, including any amendments enacted since the original drafting date. The Provincial Succession Law Reform Acts sets the foundational requirements.
When Do You Need a Testamentary Trust Declaration (Canada)?
A Testamentary Trust Declaration is needed whenever a Canadian resident wants to confirm that their estate assets are managed and distributed according to specific conditions after their death, rather than being distributed outright to beneficiaries. The most common scenario is a spousal trust: when the Testator wants to provide for their surviving spouse during the spouse’s lifetime while preserving the capital for children or other beneficiaries upon the spouse’s death. The ITA s. 70(6) rollover available for qualifying spousal trusts can result in significant tax savings by deferring capital gains on the deceased’s terminal return.
Families with minor children should strongly consider a testamentary trust. Without one, an inheritance left to a minor is typically held by the Office of the Children’s Lawyer (Ontario) or the Public Guardian and Trustee until the child reaches the age of majority (18 in most provinces, 19 in BC and Nova Scotia), at which point the entire sum is paid out. A testamentary trust allows the Testator to specify staged distributions (e.g., one-third at 25, one-third at 30, remainder at 35) and authorize the Trustee to use trust funds for the child’s education, health, and maintenance in the meantime.
A Henson Trust is essential for any Testator who has a beneficiary receiving provincial disability benefits. Without the absolute discretionary structure of a Henson Trust, an inheritance could disqualify the beneficiary from programs like ODSP, which has an asset limit of $40,000 for a single person (as of 2024). Testamentary trusts are also valuable for asset protection, protecting beneficiaries from creditors, spendthrift tendencies, or family law claims, and for tax planning around the 21-year deemed disposition rule under ITA s. 104(4). The trust allows the Trustee to plan distributions to minimize or defer capital gains tax that would otherwise arise on the 21-year anniversary.
Under Canadian law, PIPEDA and provincial privacy legislation govern personal data processed under this agreement. The Competition Act (R.S.C. 1985, c. C-34), enforced by the Competition Bureau, protects consumer rights. Section 15 of the Canada Business Corporations Act governs corporate obligations. Provincial superior courts and the Federal Court of Canada have jurisdiction for civil matters. The Canada Revenue Agency (CRA) administers tax compliance obligations.
What to Include in Your Testamentary Trust Declaration (Canada)
A thorough Canadian Testamentary Trust Declaration must include several essential elements to be legally effective and tax-efficient. First, a clear identification of the trust type: discretionary, spousal (ITA s. 70(6)), minor child, or Henson Trust. Each type has distinct legal requirements. A spousal trust must confirm the surviving spouse receives all income during their lifetime and that no other person receives income or capital before the spouse’s death. A Henson Trust must give the Trustee absolute and unfettered discretion over all distributions.
Second, the Declaration must identify the Trustee, successor trustee, and their powers and duties. The Trustee’s powers should supplement those provided by the provincial Trustee Act and include the power to invest, sell, borrow, employ professionals, make distributions, encroach on capital, and make tax elections under the Income Tax Act. The Trustee’s fiduciary duties (loyalty, impartiality, prudent investment, and accounting) must be acknowledged.
Third, thorough tax provisions are critical. The Declaration should address the T3 filing obligation, the GRE designation and its 36-month limitation, the 21-year deemed disposition rule under ITA s. 104(4), the preferred beneficiary election under ITA s. 104(14), and the spousal rollover under ITA s. 70(6). The enhanced trust reporting rules (effective 2024) requiring disclosure of all trustees, beneficiaries, and persons of influence must also be addressed.
Fourth, clear beneficiary designations with contingent beneficiaries and per stirpes distribution provisions, a spendthrift clause to protect trust assets from creditors, and provisions for the termination of the trust (including the common law perpetuity period). The Declaration should also specify trustee compensation, which in Ontario follows the traditional tariff of 2.5% on capital receipts, 2.5% on capital disbursements, and two-fifths of one percent on the average annual value of assets under management. Finally, the Declaration must be incorporated into the Testator’s Will and executed with the same formalities required by the provincial Wills Act.
Additional compliance elements for a Testamentary Trust Declaration (Canada) used in Canada include: Under Canadian law, PIPEDA and provincial privacy legislation govern personal data processed under this agreement. The Competition Act (R.S.C. 1985, c. C-34), enforced by the Competition Bureau, protects consumer rights. Section 15 of the Canada Business Corporations Act governs corporate obligations. Provincial superior courts and the Federal Court of Canada have jurisdiction for civil matters. The Canada Revenue Agency (CRA) administers tax compliance obligations. Forms-legal.com provides this template as a starting point for Canada-compliant documentation.
Sources & Citations
Statutory citations link to official government sources.
- R.S.C. 1985, c. C-34CA official
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Reference this free template in an article, syllabus, or research note:
Forms Legal. (2026). Testamentary Trust Declaration (Canada) (Canada) [Legal document template]. Forms Legal. https://forms-legal.com/canada/estate-planning/wills/testamentary-trust-declaration-canada
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Frequently Asked Questions
A testamentary trust is created through a person’s Last Will and Testament and only comes into existence upon the Testator’s death, as defined in Income Tax Act (Canada) s. 108(1). An inter vivos (living) trust is created during the Settlor’s lifetime and takes effect immediately. The key tax difference is that since January 1, 2016, testamentary trusts are generally taxed at the top marginal rate (the same as inter vivos trusts), unless the estate qualifies as a Graduated Rate Estate (GRE) under ITA s. 248(1), which allows graduated tax rates for up to 36 months after death. Additionally, a testamentary trust created as a spousal trust under ITA s. 70(6) benefits from the tax-free rollover of capital property at the deceased’s adjusted cost base. Under Canada law, Provincial Succession Law Reform Acts, parties should seek independent legal advice from a qualified lawyer to confirm compliance with all applicable requirements. Under Canadian law, PIPEDA and provincial privacy legislation govern personal data processed under this agreement. The Competition Act (R.S.C. Forms-legal.com provides this template as a starting point for Canada-compliant documentation.
A Graduated Rate Estate is the estate of a deceased individual that meets the criteria in ITA s. 248(1): it arose on and as a consequence of the individual’s death, it is within 36 months of the death, the deceased’s SIN is provided in the T3 return, the estate designates itself as the GRE, and no other estate has been designated as the individual’s GRE. The GRE is the only trust that benefits from graduated (progressive) tax rates rather than being taxed at the top marginal rate. After the 36-month period expires, the estate or any continuing testamentary trust is taxed at the flat top rate. Only one estate per deceased individual can be designated as a GRE. Under Canada law, Provincial Succession Law Reform Acts, parties should seek independent legal advice from a qualified lawyer to confirm compliance with all applicable requirements. Under Canadian law, PIPEDA and provincial privacy legislation govern personal data processed under this agreement. The Competition Act (R.S.C. Forms-legal.com provides this template as a starting point for Canada-compliant documentation.
A Henson Trust (named after the 1989 Ontario Divisional Court decision in Ontario (Director of Income Maintenance) v. Henson) is a fully discretionary trust where the Trustee has absolute discretion over distributions to a disabled beneficiary. Because the beneficiary has no legal right to compel payment, the trust assets are not considered the beneficiary’s own assets for provincial disability benefit eligibility purposes. This preserves the beneficiary’s entitlement to programs like ODSP (Ontario), PWD (British Columbia), AISH (Alberta), or SAP (Saskatchewan). The Supreme Court of Canada confirmed the validity of Henson Trusts in S.A. v. Metro Toronto Community Services (2006 SCC 27). Under Canada law, Provincial Succession Law Reform Acts, parties should seek independent legal advice from a qualified lawyer to confirm compliance with all applicable requirements. Under Canadian law, PIPEDA and provincial privacy legislation govern personal data processed under this agreement. The Competition Act (R.S.C. Forms-legal.com provides this template as a starting point for Canada-compliant documentation.
Under ITA s. 104(4), a testamentary trust is deemed to have disposed of all its capital property at fair market value every 21 years from the date the trust was created (i.e., from the date of the Testator’s death). This deemed disposition can trigger significant capital gains tax even though no actual sale occurred. To mitigate this, trustees often distribute capital property to beneficiaries before the 21-year anniversary, since the transfer to a Canadian-resident beneficiary can be done at the property’s adjusted cost base under ITA s. 107(2), deferring the tax until the beneficiary eventually sells the property. Under Canada law, Provincial Succession Law Reform Acts, parties should seek independent legal advice from a qualified lawyer to confirm compliance with all applicable requirements. Under Canadian law, PIPEDA and provincial privacy legislation govern personal data processed under this agreement. The Competition Act (R.S.C. Forms-legal.com provides this template as a starting point for Canada-compliant documentation.
Effective for taxation years ending after December 30, 2023, the Income Tax Act requires most trusts (including testamentary trusts) to file a T3 Trust Income Tax and Information Return annually, even if the trust has no income to report. The enhanced reporting rules require disclosure of the identity (name, address, date of birth, jurisdiction of residence, and taxpayer identification number) of all trustees, beneficiaries, settlors, and any person who has the ability to exert influence over trustee decisions. Failure to comply can result in penalties of $25 per day (minimum $100, maximum $2,500) under ITA s. 162(7), and gross negligence penalties of 5% of the maximum fair market value of trust property during the year under ITA s. 163(6). Under Canada law, Provincial Succession Law Reform Acts, parties should seek independent legal advice from a qualified lawyer to confirm compliance with all applicable requirements. Under Canadian law, PIPEDA and provincial privacy legislation govern personal data processed under this agreement. The Competition Act (R.S.C. Forms-legal.com provides this template as a starting point for Canada-compliant documentation.
Yes. A testamentary trust qualifies as a spousal or common-law partner trust under ITA s. 70(6) if: (a) the surviving spouse or common-law partner is entitled to receive all of the income of the trust that arises before the spouse’s death, and (b) no person other than the surviving spouse may, before the spouse’s death, receive or otherwise obtain the use of any income or capital of the trust. When these conditions are met, the deceased’s capital property is transferred to the trust at its adjusted cost base (tax-free rollover), deferring capital gains tax until the surviving spouse’s death or the earlier disposition of the property. The executor must elect to have the rollover apply on the deceased’s terminal T1 return. Under Canada law, Provincial Succession Law Reform Acts, parties should seek independent legal advice from a qualified lawyer to confirm compliance with all applicable requirements. Under Canadian law, PIPEDA and provincial privacy legislation govern personal data processed under this agreement. The Competition Act (R.S.C. Forms-legal.com provides this template as a starting point for Canada-compliant documentation.
This template is provided for informational purposes only and does not constitute legal advice. Laws vary by jurisdiction and change over time. Consult a qualified attorney for advice specific to your situation.Full disclaimer
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