Yes — and the usual fix doesn't work for that beneficiary. The rollout that saves resident beneficiaries is blocked once the recipient is a non-resident.
Short answer
Yes, the 21-year deemed disposition rule in section 104(4) applies regardless of where any beneficiary lives. But the usual planning response — distributing trust property to capital beneficiaries at cost under section 107(2) before the anniversary hits — is specifically blocked for a beneficiary who is a non-resident, because section 107(5) redirects that distribution to a different, less favourable provision instead.
Every discretionary family trust holding appreciating property faces the same clock. Section 104(4) provides that “every trust is, at the end of each of the following days, deemed to have disposed of each property of the trust”, and one of those days is the trust’s twenty-first anniversary. Without planning, that triggers a deemed disposition of the trust’s property at fair market value, taxed inside the trust.
The standard response is to distribute capital property to the beneficiaries before that date. Section 107(2) lets a personal trust roll property out to a capital beneficiary without triggering the gain: “the trust shall be deemed to have disposed of the property for proceeds of disposition equal to its cost amount to the trust immediately before that time”, so the beneficiary simply steps into the trust’s own cost, deferring the gain rather than realizing it.
Section 107(5) removes that option for a non-resident beneficiary: “Subsection (2.1) applies (and subsection (2) does not apply) in respect of a distribution of a property” to a non-resident. The rollout is replaced with a distribution under section 107(2.1) instead, which does not carry the same cost-amount relief — so the one beneficiary who has emigrated cannot receive their share of trust property the same tax-favoured way the resident beneficiaries can, even though all of them are capital beneficiaries of the identical trust.
In the Case Files library, the 21-year clock, and a beneficiary who had moved away is the exact fact pattern: three capital beneficiaries of the same discretionary trust racing its twenty-first anniversary, one of whom had emigrated eight years earlier. a graduated rate estate that expired before the shares sold and an estate freeze that taxed the founder every year show two other places where a trust or estate’s tax result turns on a status — residency, or how much time has passed — that is easy to overlook until the clock actually runs out.
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