If you want asset protection, you need a family trust
Family Trusts, originally used exclusively by the very wealthy, gained popularity in Canada following the introduction of the capital gains exemption in the mid-80s as it allowed multiple beneficiaries to claim the capital gains exemption on the sale of shares in qualifying corporations. As a result of ever-increasing individual tax rates, Family Trusts became more popular during the early 2000s due to their income splitting opportunities. That being said, the income splitting advantages all but vanished in 2019, when the “kiddie” tax was altered.
Did this kill the Family Trust? Not so. The Family Trust is very much alive, and more useful than ever.
Trusts existed before income taxes were introduced in Canada in 1917 to assist with the funding of World War I. Trusts originated from the common law principle of holding title ownership of an asset for the benefit of another and are deeply rooted in asset protection, sometimes for the beneficiary’s own protection, or as protection against creditors.
As we move towards the post COVID-19 era, asset protection and capital gains splitting remain the key features of a Family Trust. Since the implementation of a Family Trust usually involves what is commonly referred to as a “freeze” of the business’ value, this may be the opportune time to position a transfer of future value to the beneficiaries of your trust. In addition, a Family Trust continues to provide an efficient and effective mechanism to transfer rights to assets to your family members, without having to decide today which family member will receive which asset.
If you are a business owner, this is the right time to see how a Family Trust can help protect you and your family and we’d be happy to set up a consultation to help guide you through the process.
by: Kevin Montpellier -
posted on: April 29, 2020