Rhonda is divorced and lives with her 12-year-old daughter. Rhonda plans to settle a trust for her daughter and transfer $200,000 in cash to it, which will be invested for the benefit of her daughter. The terms of the trust are as follows:

1. The trust will invest the funds in Canadian marketable securities.

2. Income will accrue annually to the benefit of the daughter. However, no income will be distributed until the daughter reaches 21 years of age.

3. When the daughter reaches the age of 35 all of the trust’s capital will be distributed and the trust will cease. The trustee has developed a financial plan that includes certain mutual fund investments.

The anticipated annual return on the investment is 12%. Returns that are distributed by the mutual funds will be reinvested in the funds. It is expected that the 12% annual return will consist of the following:

Interest ……………………….	1%
Dividends ……………………….	3%
Capital gains ……………………….	4%
Total mutual fund allocations ……………………….	8%
Capital growth ……………………….	4%
Total annual return ……………………….	12%

Required:

Explain the overall tax treatment of the trust during its existence and recommend any tax planning opportunities that are available to the trustee.