During its first 36 months, an estate with a single residuary beneficiary qualified as a graduated rate estate (GRE) and was not able to convert some of the estate property into cash until late in the third year after the death. During the 36 month GRE period, the residuary beneficiary becomes disabled. Can the estate continue indefinitely and elect to be treated as a qualified disability trust each year such that the graduated tax rates will continue to apply?
CRA indicated that where an estate and a particular beneficiary meet the requirements of the definition of “qualified disability trust” in s. 122(3), the estate can be a QDT notwithstanding that the estate made a GRE designation.
However, there is nothing to indicate that there is anything preventing the executor from paying the residue of the estate to the beneficiary. Thus, if the estate administration is complete, and beneficial ownership has passed to the residuary beneficiaries who are entitled to the property, there would be no income earned in the estate. Alternatively, to the extent that the beneficiary was able to enforce payment of the income earned within the estate, there would be no income taxable in the estate, as it would all be considered to be payable to the beneficiary under s. 104(13), consistently with s. 104(24).