Contributions to an estate or testamentary trust (in this article, an “estate” for short) by anyone other than the testator can vitiate the estate’s status as such. See paragraph 108(1) “testamentary trust” (b) of the Income Tax Act (Canada). Such a contribution could result in losing graduated rate estate status, prevent the use of 164(6) in post-mortem planning and eliminate the favourable treatment available to an estate for charitable donations.
An executor or beneficiary might pay an expense (eg professional fees) on behalf of an estate. If the estate repays the amount to a beneficiary or a person not dealing at arm’s length with the beneficiary within 12 months, the amount paid will not be a contribution. Paying an estate’s tax debt would likely also compromise the estate’s status unless, again, the amount is repaid. A beneficiary to whom an amount is payable but who declines it also makes a contribution unless the trust instrument allows the beneficiary to elect not to receive the amount. The repayment to an estate of an overpayment is not a contribution because it merely returns property that always belonged to the estate.
Ergi Thodhori, “The Broad Reach of ‘Contribution’ Under the Definition of ‘Testamentary Trust’ in Subsection 108(1)” Canadian Tax Focus 16:2 (May 2026)
