tag:blogger.com,1999:blog-4402283548766807872.post539293847656831281..comments2024-03-14T19:35:14.456-04:00Comments on The Blunt Bean Counter: Prescribed Rate Loans Using a Family TrustThe Blunt Bean Counterhttp://www.blogger.com/profile/11358868550072516313noreply@blogger.comBlogger34125tag:blogger.com,1999:blog-4402283548766807872.post-44090353640135350732022-09-30T14:14:06.239-04:002022-09-30T14:14:06.239-04:00Ok, thanks for clarifying the TD and RBC differenc...Ok, thanks for clarifying the TD and RBC difference and for bringing up this issue. I am not sure which RBC article you are quoting, but I quickly skimmed two RBC articles on the topic and they say watch the debt forgiveness rules. So, I think the best course is to have your accountant review as you are doing.The Blunt Bean Counterhttps://www.blogger.com/profile/11358868550072516313noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-6259385164729538182022-09-28T21:06:50.036-04:002022-09-28T21:06:50.036-04:00Thank you for your reply. I did read TD article, ...Thank you for your reply. I did read TD article, I also read from RBC Wealth Navigator <br />"If the loan is forgiven in your Will, the<br />debt forgiveness rules do not apply.<br />Be sure to incorporate the prescribed<br />rate loan in your estate plans"<br /><br />Because of the difference is why a reached out to you.<br />My accountant is currently looking into but I believe this is something people should be aware of when setting up a family trust. <br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-67707779387099826772022-09-28T18:22:20.503-04:002022-09-28T18:22:20.503-04:00Hi Anon, I have never had to look at the issue. I ...Hi Anon, I have never had to look at the issue. I quickly googled and TD Wealth had a comment on the web about forgiving a prescribed loan in which it says "there may be adverse tax consequences in doing so. For example, the debt forgiveness rules would be applied to the borrowing spouse who could potentially have an income inclusion of the forgiven amount. You should speak to your tax advisor". <br /><br />I agree with TD, speak to your advisor as there are likely adverse tax consequences if the loan is forgiven.<br />Blunt Bean Counternoreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-21198582238877646532022-09-26T21:12:18.222-04:002022-09-26T21:12:18.222-04:00If one spouse has done prescribed rate loan to fam...If one spouse has done prescribed rate loan to family trust, in their will can they forgive loan or does it need to transfer to another person (spouse)?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-22737579679831617742020-03-17T21:11:46.485-04:002020-03-17T21:11:46.485-04:00My understanding is the CRA does not accept replac...My understanding is the CRA does not accept replacing a prescribed loan just because the rate goes lower.The Blunt Bean Counterhttps://www.blogger.com/profile/11358868550072516313noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-11733759126391701452020-03-14T22:45:12.721-04:002020-03-14T22:45:12.721-04:00When interest rate for prescribed loan hit 0% what...When interest rate for prescribed loan hit 0% what steps are required to cancel previous loan 1% and re loan at 0%GBMhttps://www.blogger.com/profile/08317834759777243178noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-62635634651416427352017-07-04T20:12:16.510-04:002017-07-04T20:12:16.510-04:00Hi N
Off the top of my head it may be problematic...Hi N<br /><br />Off the top of my head it may be problematic. Speak to your accountant to review the detailsThe Blunt Bean Counterhttps://www.blogger.com/profile/11358868550072516313noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-75741683512015963242017-07-03T20:19:31.357-04:002017-07-03T20:19:31.357-04:00Hi BBC,
I have a standard opco+holdco setup. I ha...Hi BBC,<br /><br />I have a standard opco+holdco setup. I have lots of retained earnings sitting in the holdco. If I set up a standalone family trust, with my kids as beneficiaries, could we lend money from our holdco to the trust? <br /><br />The plan would be to invest the money inside the trust and distribute any earnings to our kids.<br /><br />Or would the holdco and trust be deemed to be 'connected' somehow, meaning that the loan would need to be repaid by the end of the next tax year?<br /><br />Many thanks for all your insightful posts!!<br />NAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-65321589184917045932017-06-18T21:35:37.658-04:002017-06-18T21:35:37.658-04:00Hi Chris
This quote comes from an Assante Wealth ...Hi Chris<br /><br />This quote comes from an Assante Wealth Group document:<br /><br />The current position of the Canada Revenue Agency (CRA) is that expenditure may be considered paid or payable, and therefore deductible by a trust, if it was made for the beneficiary’s benefit. This may include an amount paid out of the trust for the support, maintenance, care, education, enjoyment and advancement of the beneficiary, including the beneficiary’s necessities of life. For example, it may be acceptable for the trust to pay third parties or to reimburse the parents for specific expenses attributable to the children (or grandchildren) such as clothing, tuition, day or summer camp, day care, airline tickets (for the children or grandchildren), sports lessons and equipment, computers, furniture (for a child’s or grandchild’s room), music lessons and music equipment, and gifts. The key is to maintain proper documentation and to be able to demonstrate that the money was used for the benefit of the beneficiary. The Blunt Bean Counterhttps://www.blogger.com/profile/11358868550072516313noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-64122670395282917262017-06-17T08:57:10.015-04:002017-06-17T08:57:10.015-04:00YOu mention.
"The trust can be used to pay th...YOu mention.<br />"The trust can be used to pay the children’s school costs, camp costs, etc."<br /><br />Can you increase your examples of what the trust can be used for that is much more extensive? For example if the funds are going to grandchildren under 5. Could the money go for a higher end daycare with learning etc...vs a cheaper alternative? Can the kids put the money into their RESP? ...How about toys , clothing, food? <br />Thank you.Chrisnoreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-83891691818306664392017-02-15T22:54:09.022-05:002017-02-15T22:54:09.022-05:00I would suggest you cannot carry forward expenses ...I would suggest you cannot carry forward expenses paid on behalf of the children (as per the article, u can carryforward losses), but your accountant my have a different opinion.<br /><br />Also speak to your accountant about allocating the $22k to your kids anyways if this is a prescribed rate trust and kiddie tax is not applicable. The money would belong to them, but they can pay other future expenses. I dont know the details of your trust, so speak with your accountant,u may have options. If you dont have one, engage one. The Blunt Bean Counterhttps://www.blogger.com/profile/11358868550072516313noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-38754480892976951272017-02-15T11:15:28.560-05:002017-02-15T11:15:28.560-05:00Thank you for the article BBC. I might have misse...Thank you for the article BBC. I might have missed something in there, but I don't think it addresses my question. Let me use an example:<br /><br />Trust 2016 income - $0<br />Kids 2016 expenses (i.e. sport camps, toys, etc) - $10k<br /><br />Trust 2017 income - $25k<br />Kids 2016 expenses - $12k<br /><br />If I could carry those 2016 expenses forward to the 2017 return, then the trust would allocate 22k of expenses to the kids, and 3k to my wife. If not, then the trust would allocate 12k to the kids and 13k to my wife, resulting in higher taxes paid is she is at or near highest marginal tax rate and kids would be zero.<br /><br />Thanks if you can help/opine! <br /><br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-1312239952510176432017-02-06T23:09:02.235-05:002017-02-06T23:09:02.235-05:00Hi Anon:
Sorry I dont know the answer off the top...Hi Anon:<br /><br />Sorry I dont know the answer off the top of my head as there are many complicated rules with trusts that can cause them to be tainted. Ask your accountant.The Blunt Bean Counterhttps://www.blogger.com/profile/11358868550072516313noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-31049832257439915872017-02-05T10:13:35.552-05:002017-02-05T10:13:35.552-05:00Hello.
Thank you for your blog.
If a trust owns...Hello.<br /><br />Thank you for your blog. <br /><br />If a trust owns all of the participating shares of a corporation, Would there be any fiscal problems if a loan is made from the corporation to the trust using the prescribed interest rate loan? There are minors that are beneficiaries in the trust...<br /><br />Thank youAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-20048003316539805112017-01-10T21:02:54.780-05:002017-01-10T21:02:54.780-05:00Hi 3waller
This article seems to be what you are ...Hi 3waller<br /><br />This article seems to be what you are asking<br />https://www.marcil-lavallee.ca/en/resources-tools/monthly-newsletters/list-per-month/81-taxation-of-trustsThe Blunt Bean Counterhttps://www.blogger.com/profile/11358868550072516313noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-5235954726956190742017-01-10T16:43:30.126-05:002017-01-10T16:43:30.126-05:00Hoping it's not too late to ask a question on ...Hoping it's not too late to ask a question on this post. I established a Trust for my family years ago and the trust has earned foreign (US) business income every year but 2016 (bad year for the business that the trust owns part of). Typically I allocate what income I can to the kids and the balance to my wife. My question is, can I "carry forward" the 2016 expenses for the kids into 2017? There will be income in 2017.<br /><br />Thanks.3wallernoreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-135610294627902752015-12-16T17:42:22.617-05:002015-12-16T17:42:22.617-05:00Hi Anon
Loans from a trust can sometimes be probl...Hi Anon<br /><br />Loans from a trust can sometimes be problematic. You should get some professional advice on this transaction. I do not provide such on this blog.The Blunt Bean Counterhttps://www.blogger.com/profile/11358868550072516313noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-28549651888185967692015-12-15T22:21:52.518-05:002015-12-15T22:21:52.518-05:00I recently received funds from a family trust in w...I recently received funds from a family trust in which I'm named (from my parents) on Aug. 19th, 2015. I took the funds as a loan, and plan to re-pay the loan plus the prescribed interest. My question is, when do I have to repay this loan to avoid having the funds count as my personal income for 2015? Is the deadline Jan. 31, 2016? Thanks!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-39757356075894739112014-05-27T14:30:57.688-04:002014-05-27T14:30:57.688-04:00I personally keep the funds separate and do not lo...I personally keep the funds separate and do not loan them back to the trust.The Blunt Bean Counterhttps://www.blogger.com/profile/11358868550072516313noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-78421775588027054272014-05-27T10:52:58.833-04:002014-05-27T10:52:58.833-04:00Thanks.
Assuming in the child's bank accoun...Thanks. <br /><br />Assuming in the child's bank account, they have excess funds or cannot use all the investment income that is distributed to them, for a discretionary family trust, does the child (or any other beneficiary) have the option of contributed that cash back into the trust?<br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-88036864027401181522014-05-27T07:22:25.385-04:002014-05-27T07:22:25.385-04:00Hi Anon:
My firm likes to have our clients open a...Hi Anon:<br /><br />My firm likes to have our clients open an account for the child and distribute the money first from the trust to the child's account and then the child's account pays for the expenses. It provides a clean trail. <br /><br />I dont have my clients reimburse for the basic necessities of living, although I would ask your accountant/lawyer their opinion.The Blunt Bean Counterhttps://www.blogger.com/profile/11358868550072516313noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-38900696385266187142014-05-27T01:43:57.049-04:002014-05-27T01:43:57.049-04:00BBC,
When the kids are distributed the investment...BBC,<br /><br />When the kids are distributed the investment income, administratively, how do you suggest that this is separated?<br /><br />Also, do you think the trust could spend money on the kids such as normal living expenses (eg: food, clothes, etc)? Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-5502309993969108462013-06-14T21:42:38.653-04:002013-06-14T21:42:38.653-04:00Anon,
Great question. I have never had to look a...Anon, <br /><br />Great question. I have never had to look at this so actually not sure if it would just be a capital loss to the lender and whether there could be debt forgiveness issues to the trust. Sorry, don't know off the top of my head and don't have time to research it.The Blunt Bean Counterhttps://www.blogger.com/profile/11358868550072516313noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-72502651946861901992013-06-14T19:30:33.707-04:002013-06-14T19:30:33.707-04:00What are the tax implications if the Trust's c...What are the tax implications if the Trust's capital is less than the original loan, and the therefore the repayment of the loan is less than the original loan?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-4608295762873834742013-05-19T19:45:28.738-04:002013-05-19T19:45:28.738-04:00Sorry, you continued under Bruce's question. S...Sorry, you continued under Bruce's question. Some great points, want to write a guest blog on the topic?The Blunt Bean Counterhttps://www.blogger.com/profile/11358868550072516313noreply@blogger.com