Family trusts have the same benefits in Canada as elsewhere. However, some of the legal frameworks applicable in Canada mean that trusts, which are commonly used by the wealthy in all countries, can be used to great advantage even by middle-class families. Read on to learn about the two main, unique benefits that Canadians can get from family trusts.
Dividend tax credit and personal tax credit
Canada’s dividend tax credit enables individuals to claim a credit against the dividends they receive from Canadian corporations. This is applicable to the beneficiaries of family trusts too, meaning that Canadians without any other income – such as students with deductible education expenses – could receive thousands of dollars in tax-free income.
Estate freezes are one way in which the benefits of family trusts can be extended to benefit, not only very wealthy families, but middle-class ones as well. An estate freeze is any strategy whereby an estate owner can transfer assets to their beneficiaries while avoiding tax consequences. Family trusts facilitate tax freezes because estate owners can transfer assets such as shares and stocks into the trust. Beneficiaries are then not taxed on these assets or any capital gains they may yield.
NPW Wealth Advisors are committed to helping high net-worth families and individuals manage their wealth, grow their assets and plan their estates for a tax-efficient transfer while lowering costs. For more information on Canadian family trusts and their benefits, as well as all the other tools at our disposal to help you protect and grow your wealth, contact us today.