July 2026
KFG Law
Tax & Business Focus
About the Author
With over 20 years of experience, Marc has established himself as a leading authority in domestic and international tax planning.
Marc acts as a strategic tax and corporate advisor to a diverse roster of clients, including entrepreneurs, high-net-worth individuals, owner-managed businesses, established corporations, and family offices. His clients rely on his sophisticated and practical counsel to help them achieve complex business and personal objectives.
He has extensive experience advising on tax-driven corporate reorganizations, cross-border transactions—particularly between Canada and the United States—and tax planning for multinational corporations. Marc also provides comprehensive succession and estate planning services for family businesses, including those involving Canadian residents and U.S. citizens, family trusts, offshore structures, estate administration, and post-mortem tax planning designed to minimize multiple levels of taxation.
In addition, Marc represents clients in all aspects of tax controversy matters, including Canada Revenue Agency audits, appeals, voluntary disclosures, and negotiated tax payment arrangements.
While his practice spans a wide range of corporate matters, Marc’s primary focus is on complex mergers, acquisitions, and dispositions of businesses, private equity-sponsored transactions, and private placements related to the acquisition of operating businesses and real estate portfolios. He also regularly advises on sophisticated business transactions, including corporate financings, real estate-based partnership syndications, and shareholder agreements.
About KFG Law
KFG Law is a full-service boutique law firm with offices in Toronto.
The firm provides clients with a broad range of legal services and deep expertise across key practice areas, including corporate and commercial law, mergers and acquisitions, tax, estate planning and administration, banking and financing, real estate, commercial litigation, estate litigation, employment, and securities law.
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Please email Agnesa Mauro at agnesa@kfglaw.ca
The GRE: What It Is, Why It Matters, and How to Preserve It - Maximizing Estate Tax Efficiency
At KFG LLP, we deliver sophisticated legal counsel to a wide range of business clients, from small, owner-operated enterprises and their principals to large multinational corporations, limited partnerships, private equity firms, and real estate syndications, in both domestic and cross-border contexts. We offer creative, tax-efficient, and cost-effective solutions to complex tax and business law matters, including the design and implementation of corporate structures.
Introduction
Effective estate planning requires a clear understanding of the strategic tools available to minimize taxes and preserve wealth for beneficiaries. One of the most powerful of these tools is the Graduated Rate Estate (“GRE”).
A GRE allows for post-mortem tax planning opportunities and provides access to graduated tax rates for a limited period following death. When properly maintained, it can generate significant tax savings for an estate and its beneficiaries.
This bulletin provides an overview of what a GRE is, how an estate qualifies for GRE status, and why preserving that status is essential to maximizing estate tax efficiency.
What Is a GRE?
A Graduated Rate Estate (GRE) is a testamentary trust that arises on, and as a consequence of, an individual’s death and meets specific requirements under the Income Tax Act (Canada).
While other testamentary trusts may arise under a will (such as spousal trusts, disability trusts or insurance trusts), it is generally the general estate that is designated as the GRE.
Importantly, only one testamentary trust per deceased individual may be designated as a GRE. The use of multiple wills does not create multiple estates for tax purposes.
How to Qualify as a GRE
To qualify for GRE status, an estate must meet the following requirements under the Income Tax Act:
1. Designation
The estate must designate itself as a GRE on its first T3 trust income tax return.
2. Exclusivity
Only one estate per deceased individual may be designated as a GRE.
3. Identification
The deceased’s Social Insurance Number must be included on all tax returns filed by the estate.
4. Thirty-Six Month Limitation
The estate is within the 36 months of the individual’s death.
Benefits of GRE Status
1. Post-Mortem Planning Opportunities
GRE status enables certain tax planning strategies that are otherwise unavailable. These strategies are particularly important when the deceased owned shares of a private corporation.
Two common planning techniques include:
• Pipeline planning, and
• Section 164(6) loss carryback planning
Both strategies help mitigate double taxation that can arise on death.
For example, shares of a private corporation may be subject to tax twice:
• once on the deemed disposition at death, and
• again when funds are extracted from the corporation.
Proper GRE planning can help reduce or eliminate this double taxation.
2. Graduated Tax Rates and Administrative Flexibility
A GRE also benefits from more favorable tax treatment during the early stages of estate administration.
Key advantages include:
• Graduated tax rates on estate income for the first 36 months after death, rather than taxation at the top marginal rate; and
• The ability to choose a non-calendar year-end, which may allow for tax deferral and improved planning flexibility.
It is important to note that GRE status automatically expires after 36 months following death. This deadline cannot be extended—even in cases involving litigation or administrative delays.
Situations That Can Cause GRE Status to Be
Lost GRE status may be lost where the estate receives contributions from a person other than the deceased, or where non-arm’s length arrangements arise (i.e., the estate receives certain forms of non-arm’s-length support or financing). Common examples include:
• Contributions made to the estate by beneficiaries or third parties.
• Beneficiaries paying estate expenses or taxes on behalf of the estate.
• Loans from beneficiaries to the estate that are not repaid within one year.
• The failure to administer and distribute assets in accordance with the will.
If GRE status is lost—or once the estate is fully administered—any income earned thereafter will generally be taxed at the top marginal rate.
Key Takeaways
To preserve GRE status, estate trustees and beneficiaries should avoid adding funds to the estate or paying estate expenses personally. Even well-intentioned actions—such as a beneficiary covering estate costs temporarily—can unintentionally disqualify the estate from GRE status.
Because GRE status enables important post-mortem tax planning strategies and access to graduated tax rates for up to 36 months after death, careful administration of the estate during this period is essential.
Early coordination with tax and legal advisors can help ensure the estate maintains its GRE designation and maximizes available tax efficiencies.
This publication is intended for general information purposes only and should not be relied upon as legal advice. ©KFGLAW.CA