Your Friend Andrew Has Heard That You Are Studying Canadian

question 1

Essay

Your friend Andrew has heard that you are studying Canadian income taxation. He has heard people discussing something called the '21 Year Rule' with regard t trusts. He has come to you with questions regarding this rule, since his father
recently established inter vivos trusts for both Andrew and his mother.
Required:
Briefly answer the following questions:
With regard to non-spousal trusts:
1) What is the purpose of the "21 Year Rule"?
2) What event occurs on the 21st anniversary of a trust?
3) What types of properties are subject to the 21 Year Rule?
4) How can the consequences of the 21 Year Rule be avoided?
With regard to spousal trusts:
5) What is the exception to the 21 Year Rule for spousal trusts?

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Definitions:

Real Interest Rate

The interest rate adjusted for inflation, reflecting the true cost of borrowing or the true return on savings.

Nominal Interest Rate

The interest rate before adjustments for inflation, representing the face value of financial transactions.

Inflation Rate

The rise in the average cost of goods and services within an economy over a specific period, expressed as a percentage.

Present Value

The current valuation of a prospective sum of money or cash flow series, factoring in a designated rate of return.