🏛️ The Strategic Power of Trusts in Canadian Tax & Estate Planning

How Canada’s most successful families and business owners use trusts to safeguard wealth and strengthen multi-generational legacies.

For over almost 20 years, we’ve helped affluent Canadians build and preserve generational wealth. One tool consistently used by Canada’s wealthiest families is a Trust - a uniquely flexible structure for tax mitigation, asset protection, governance, and legacy planning.

🔎 What Is a Trust?

A trust is a legal relationship, not an entity.

A settlor transfers assets to a trustee, who manages them for beneficiaries in accordance with the trust terms. This separation of ownership and benefit creates the foundation for tax, estate, and asset-protection advantages.

🏆 Trust Structures Used by High-Net-Worth Canadians

Inter Vivos (Living) Family Trusts

Common uses include:

• Income splitting (where permitted under current rules)

• Holding private company shares

• Implementing estate freezes

• Providing creditor and marital protection

• Managing assets on behalf of children or vulnerable family members

Testamentary Trusts (via Will - created after death)

Used for:

• Staged or controlled inheritance

• Divorce and creditor protection

• Managing inheritances for minors

• Supporting disabled beneficiaries through a Henson trust

• Long-term governance of family wealth

Spousal Trusts

Key benefits:

• Capital gains deferral on death

• Ongoing support for the surviving spouse

• Protection of capital for intended beneficiaries (e.g., children from a previous marriage)

Alter Ego & Joint Partner Trusts (65+)

Ideal for affluent Canadians looking to:

• Avoid probate on trust assets

• Maintain privacy and control

• Ensure continuity in case of incapacity

• Simplify estate administration

💼 Key Tax Planning Advantages

Estate Freezes

A foundational tax strategy for business families. An estate freeze allows you to:

• Lock in today’s value of your business shares

• Transfer future growth to children or a family trust

• Multiply the Lifetime Capital Gains Exemption (LCGE)

• Reduce future capital gains tax upon transition or sale

This often results in significant long-term tax savings.

Income Splitting Opportunities

Despite tightened rules, trusts remain effective for:

• Allocating capital gains

• Receiving dividends from active business corporations (in permitted circumstances)

• Prescribed-rate loan strategies to a family trust

Proper structuring is essential to avoid punitive tax.

Probate Minimization & Privacy

Trust-held assets:

• Bypass probate (saving thousands, or even tens of thousands, in fees)

• Maintain privacy

• Allow for faster, smoother distribution to beneficiaries

For high-net-worth estates, privacy and efficiency are often key considerations.

🛡️ Asset Protection Benefits

Trusts can help protect wealth from:

• Lawsuits

• Creditors

• Divorce or relationship breakdowns

• Business risks

• Beneficiary mismanagement or overspending

They are especially valuable in families where:

• Children work in high-risk professions

• Wealth must stay within the bloodline

• Legacy properties need long-term protection

🏢 Trusts for Business Owners

Trusts are one of the most important tools available to successful business owners. They can be used to:

• Hold operating company or holdco shares

• Receive dividends tax-efficiently

• Multiply the LCGE on a sale

• Facilitate intergenerational succession

• Support family office-style governance

Trusts also integrate with advanced strategies such as:

• Freeze–thaw planning

• Section 85 rollovers

• Post-mortem planning

• Corporate restructuring and pipelines

❤️ Philanthropy & Trust-Based Charitable Planning

Trusts are often incorporated into philanthropic strategies through:

• Charitable remainder trusts

• Private charitable foundations

Benefits include:

• Immediate tax credits

• Long-term structured giving

• Alignment of philanthropy with family values

• Potential capital gains advantages

❓ Is a Trust Right for You?

You may benefit from a trust if you:

• Have a net worth of $2M+

• Own businesses or professional corporations

• Desire multi-generational wealth protection

• Value privacy, structure, and tax efficiency

• Want a long-term legacy plan

📞 Ready to Explore Whether a Trust Can Strengthen Your Wealth Plan?

If you are considering advanced tax, estate, or corporate planning - such as an estate freeze, probate reduction, business succession, or multi-generational wealth strategy - we invite you to schedule a confidential consultation.

For almost 20 years, we’ve helped high-net-worth families protect and transition wealth with clarity, confidence, and precision.

Reach out to us to explore how a trust can help support your long-term goals.

Disclaimer: This newsletter is for informational purposes only and does not constitute legal or tax advice. For guidance specific to your situation, consult a qualified professional in Ontario.