10 June 2016 STEP Roundtable Q. 1, 2016-0634871C6 - GREs and Testamentary Trusts -- summary under Paragraph (b)

If the will of the deceased provides for the division of the residue into testamentary trusts (e.g., a spousal and children’s trust), the estate can no longer qualify as a graduated rate estate (i.e., even before the passage of 36 months from death) if all the assets become held in those testamentary trusts. Once this occurs, the problem cannot be solved by transferring the assets in the testamentary trusts back to the estate. CRA also considers that the testamentary trusts arise at the time of death.