(a) What is required for all interests in a trust to have vested indefeasibly; and
(b) how is this disclosed on the trust return?
(a) CRA noted that its comments in 2018-0744111C6, as to what is required in order for an interest in a trust to vest indefeasibly, still apply.
For an interest in a trust to vest indefeasibly in a beneficiary of the trust, the situation must be one where the beneficiary can be ascertained and there is no condition precedent to the beneficiary holding such trust interest. Further, there must be no condition subsequent or possible future event or limitation that could revoke, limit or defeat the beneficiary’s interest in the trust. Where none of the exceptions in subparagraphs (g)(i) through (vi) apply, and it is clear in law that the interests have vested indefeasibly since inception, or where a trust gives the trustees the power to indefeasibly vest the interest in the trust and they lawfully do so before the 21st anniversary date specified in s. 104(4), the 21-year deemed disposition rule will not apply.
(b) After indicating that the T3 return does not request information on whether all of a trust’s interests have vested indefeasibly, CRA noted that those handling CRA’s intake and assessment of T3 returns have seen various approaches including a covering letter or a note on the top of the return explaining why no T1055 form was being filed (or simply stating that all interests had vested indefeasibly), or filing a blank T1055 along with such a note.