I see that in the will that my crazy will and estate lawyer drafted for me, there is reference to a GRE or Graduated Rate Estate. What in the name of making a simple thing complicated is a GRE?
No this is not an effort by our office , lawyers in Brampton for wills, to make something simple complicated. But rather it is an effort by your wills and estates lawyers, in providing your estate with as many tax saving tools as possible. An estate is treated very differently from a live taxpayer. It must pay tax upon all of its income at the highest marginal rate, which in Ontario is presently 53.3%. An exception would be if your estate made an election within its first year, which is a step that the estates’ accountant must do, so that the estate for the first 36 months of its existence can be treated as a graduated rate estate.
Graduated rate simply means enjoy the same increasing rate of income taxation that a live tax payer enjoys. As an example, if an individual only earns $10,000 in a year, the government will let you keep all of it. However, as your income increases, the government will take an ever-greater share up until it reaches the ultimate level of tax at the rate of 53.3%. To enjoy a GRE, the estate needs to meet a few technical requirements as imposed by the Income Tax Act. It must exist for no more than 36 months and the estate must be considered a testamentary trust. The vast majority of estates indeed are testamentary trusts and most importantly the estate must file an election within its first year as a GRE. This can save a significant amount of tax and that is why your Will prepared by Dale Streiman Law LLP Estate Lawyers makes reference to a GRE. In other blogs we will discuss other tax advantages of a GRE.
