Uses of Family Trusts

Trusts are used in many different circumstances and come in different flavours. Anyone who has an RRSP or a RRIF has a trust. Our main use of trusts is for advanced corporate structuring. Trusts are used in corporate structuring to better protect your assets from future creditors. Trusts empower you to better deal with future financial difficulties.  Additionally, trusts allow you to transfer shares in your corporations to other family members without losing control. For instance, a trust can be used so that every member in your family enjoys a $750,000.00 tax free capital gain on the sale of the shares in a qualified small business.

Another major use of trusts is for estate planning. In Canada, if you are over 65 years of age you can transfer assets into special types of trusts tax free which allows you to control your assets and enjoy the income while you live but which distributes your capital to your beneficiaries when you die.  Many prefer to provide for the distribution of their capital to beneficiaries while they are of strong mind rather than having worried potential beneficiaries ask for a new will when you are near death. Testamentrary trusts (those in a will), that takes effect on death, also offer certain income tax benefits. With these estate planning trusts, you'll need to follow certain income tax rules in order to get the benefit you seek.

A trust can be set up for a specific purpose; such as to run a business or hold a specific parcel of land. In Canada, a person can set up a principal residence trust to better protect their home from future creditors while continuing to enjoy his or her principal residendence capital gains exemption.