The Canada Revenue Agency (CRA) confirmed Friday that only one estate can be created on the death of an individual, clearing up a degree of confusion among trust and estate planners arising from wording in new legislation concerning the taxation of testamentary trusts.

“It is the CRA’s view that an individual on death has only one estate, a singular entity,” said Phil Kohnen, manager of the trusts section in the income tax rulings directorate with the CRA, during the agency’s roundtable session at the Canadian chapter of the Society of Trust and Estate Practitioners’ (a.k.a. STEP Canada) 2015 national conference in Toronto on Friday. “And that estate encompasses total property of whatever kind, regardless of where it may be situated, that is owned at death by the decedent.”

The confusing new wording, added under subsection 248(1) of the Income Tax Act, involves the definition of a graduated rate estate (GRE), specifically that “no other estate designates itself as the graduated rate estate of the individual.” This suggested that the CRA might consider the existence of more than one estate, only one of which could be regarded as a GRE. A GRE is an estate that has access to graduated-rate taxation, as opposed to flat top-rate taxation that will apply to testamentary trusts starting in 2016, for the first 36 months after the death of the individual.

Given that estate plans are often complex — and that more than one testamentary trust can be created by will — trust and estate planners were concerned about the implications of the wording. The CRA’s response appears to provide clarity on the issue.

“We believe that the [wording] was [used as] a greater certainty provision,” Kohnen said, “really there to ensure that if you do, in fact, have competing parties, executors for example, that might each want to attempt to make a GRE designation, that would not be a possibility.”

Estate and trust practitioners have been asking the CRA for more clarity, in general, regarding the new rules governing the taxation of testamentary trusts and the designation of GREs. In addition to access to the graduated rates, the designation of a GRE allows for access to several favourable estate planning exemptions and elections.