The preferred beneficiary election allows amounts to be taxed in the hands of a beneficiary even though the amounts have not been distributed to that beneficiary. What is the objective of this election?

Question

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The Answer is The preferred beneficiary election is only available if:
• the beneficiary is claiming the disability tax credit; or
• the beneficiary is 18 years of age or older, is claimed by another individual as a dependant, and does not have income that exceeds the base for the beneficiary's personal tax credit.
As such individuals usually have very little income, the objective of this provision is to allow the relevant amounts to be taxed at low rates, while not transferring the funds to an individual who might not be able to use them in an appropriate manner (e.g., a mentally infirm child).

The Preferred Beneficiary Election Allows Amounts to Be Taxed in the Hands