A family trust is an extremely effective tool for the management and transfer of family assets. There are four primary advantages of family trusts – and these are enough to prove how important it is for a high-net-worth family to consider establishing one.
Reduce the tax payable on death
An individual who holds a large number of assets, from real estate to shares, can transfer these into a family trust to prevent their estate from having to pay exorbitant taxes after they pass away. The trust, rather than the individual, becomes the owner of the assets, meaning that any future capital gains are also earned by the trust. As a result, these gains are not taxable when the individual dies.
Plan the transfer of wealth
A trust smooths and facilitates the transfer of assets within the family after the death of the settlor. It enables the settler to stipulate very specific terms and conditions for the transfer of assets, i.e. who gets what, how and when.
A family trust holds assets on behalf of its beneficiaries, shielding them from any claims that creditors might make against individual beneficiaries. If a beneficiary loses a lawsuit, for example, assets held in the trust cannot be seized for the benefit of a third party.
Protect a child
There are numerous ways for a trust to be used for the benefit of children. The specific rules are laid down when the trust is established, setting out specific ways in which wealth may be transferred to children. It could come in the form of an annuity or a donation to be managed by the trustees rather than being transferred directly into the child’s hands. In this way, a trust can be used to provide for a child who can’t work due to a disability or in creating a long-term financial benefit for grandchildren.
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 the advantages of a family trust in Canada, as well as all the other tools at our disposal to help you protect and grow your wealth, contact us today.