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I have a family trust owning assets and I've heard of something called the 21 Year rule. What does that mean? - Madan CA

I have a family trust owning assets and I’ve heard of something called the 21 Year rule. What does that mean?

Allan Madan, CA
 Nov 12, 2013
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After 21 years of the family trust’s formation, the trust is deemed to have disposed of and reacquired certain types of property at their fair market value. This can give rise to a capital gain since most property increases in value over time. The 21 year rule for Trusts and its impact on you, should be discussed with a professional accountant.

Note that capital gains realized inside a trust are taxed at the highest marginal tax rate. The trust may not even have the cash-flow to pay the income tax liability triggered as a result of the 21 year rule. A professional tax expert can help you utilize the many tax strategies available to plan for this event.

 

Disclaimer

The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting and financial professionals. Allan Madan and Madan Chartered Accountant will not be held liable for any problems that arise from the usage of the information provided on this page.

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