Trusts are recognized in Canada under the Company Law. According to this law, there are various types of trusts local and foreign citizens can establish in Canada. The trust is not considered a legal entity, such is the case of companies. Below, our Canadian company formation agents explain the elements of the trust and how one can open a trust in Canada, with our assistance.
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What are the main categories of trusts in Canada?
The Canadian law establishes 2 main categories of trusts, namely:
- testamentary trusts (created as a result of someone’s death);
- inter vivo trusts (created while the settlor is alive).
How many testamentary trusts are recognized under the Canadian law?
There are 4 testamentary trusts:
- spousal or common-law partner trust;
- lifetime benefit trust;
- graduated rate estate;
- qualified disability trust.
How many inter vivo trusts can one set up in Canada?
Inter vivo trusts represent the majority of truststhat can be registered in this country. At the moment, it is possible toregister 31 types of inter vivo trusts; our consultants can provide in-depth information on all these options.
What are the most popular trusts in Canada?
Canada is, perhaps, one of the few countries which provide for a large variety of trusts. There are a little over 30 types of trusts which can be established in Canada. The following types of trusts are more common in Canada:
- family trusts which are created as testamentary trusts most of the times;
- trusts which can be set up for various employment purposes, such as benefit plans, and life and health trusts – these are usually created by Canadian companies;
- mutual fund and real estate investment trusts which are created for investment purposes;
- retirement income trusts, savings trusts, and compensation arrangement trusts are also common in Canada.
What are the elements of trusts in Canada?
A Canadian trust, no matter its type, will have the following elements:
- the settlor – the person creating the trust;
- the trustee – who will act as the administrator of the trust;
- the beneficiary or beneficiaries – the person or persons who will benefit from the assets held by the trust.
Can I set up public trusts in Canada?
Yes, the Canadian legislationallows the registration of public trusts. These can be of 2 types:
- a public trust whose unit can be listed on the stock exchange;
- a public investment trust.
What is a real estate investment trust in Canada?
A real estate investment trust can be set up here only if the entity is a Canadian tax residentand its investments in real estate meet the following conditions:
- minimum 90% of the trust’s propertiesare listed as qualified real estate;
- at least 90% of thetrust’s gross revenuederives from: rent, real estate, interest, capital gains, eligible property resales, dividends, etc.
What is a family trust in Canada?
This type of entity has the purpose of protecting the estate of a family and it can also provide various tax advantages. From a legal point of view, a trust has the characteristics of a legal entity that is separated from the person who created it. While not a legal entity in itself, the trust is treated as a separate person from the owner.
What is a testamentary trust in Canada?
Another type of family trust is the testamentary trust in Canada, which is set up at the moment when the person who owns a certain estate dies. The terms that will set up the trust will follow the wishes prescribed by the deceased in his or her will, or, if there isn’t a will, in accordance with the rules of the Canadian province where the person has his or her residency.
What are the trusts’ code numbers?
When registering a trust in Canada, the entity will receive a code number, in accordance with its type, as follows:
- inter vivo trusts will receive a code number ranging from Code 300 to Code 350;
- testamentary trusts – from Code 900 to Code 905.
What institution is in charge with the issuance of the code number?
The Canada Revenue Agency is the institution responsible for this procedure.
Do I need to file tax returns for my trust in Canada in 2026?
Yes, tax return obligations can appear for the majority of trusts, in accordance with the rules of the Income Tax Act. Please refer toour specialistsfor information on the tax rules deriving from this law.
Do I need to submit tax returns even if my trust is inactive?
Yes. Inactive trusts can also have reporting obligations. Please mind that non-reporting or late reporting can result in various fees that can increase to $2,500 per year.
What are some of the characteristics of a trust in Canada?
In the list below, our consultants present a few important aspects you should know about local trusts:
- the standard lifetime of a family trust in BC is 80 years;
- in other Canadian regions, the standard lifetime is 21 years;
- through a trust, one can avoid the payment of the probate fee, charged at the standard rate of 1.4% in British Columbia, from the value of the deceased’s estate, if the transfer of ownership is done through regular means (through will or by inheritance);
- the probate procedure will also include specific steps that take time during the distribution of assets (it can take several months) and after the decision on the distribution of the assets is made, the executor has to wait 210 days before actually distributing the assets, and this does not occur when setting up a trust in Canada;
- it can also avoid any additional claims that can be made by heirs if the inheritance was obtained through a will, following the rules of the Wills, Estates and Succession Act Part 4, Division 6.
For assistance in establishing a trust in Canada, please feel free tocontact us.