34 | spring 2015 mbabc.ca MortgageBroker
familytrusts
them for the benefit of identified beneficiaries. e terms of the trust
can be as simple or as complex as you want, and should be in writing.
A properly structured family trust may offer you great flexibility
in both your corporate and succession planning. Some potential
advantages are outlined below:
Control: As the trustee, you hold the legal title of the assets held by
the family trust, including the shares and any dividends paid on those
shares. If the trust is discretionary, the interest of the beneficiaries is
contingent on the trustee's decisions regarding distribution. is allows
you to make unequal distributions among beneficiaries and to defer the
decision of who will ultimately receive personal shares in the business.
If the same beneficiaries hold shares personally, all shareholders of the
same class of shares will be entitled to equal treatment, regardless of
their involvement in the company.
Additionally, until the trustee distributes specific shares to each of
the beneficiaries, you retain control of corporate governance such as
the election of directors. is right is reserved for all other shareholders
of voting shares, such as you personally or the trustee on behalf of the
family trust.
Income Splitting: One of the main reasons business owners want
to add family members to their corporation is to take advantage of
income splitting. Income splitting is the process of redirecting income
earning assets within a family unit. is too, is possible within the
family trust, whereby a trustee transfers income from high- to low-
income beneficiaries, including children who are over the age of 18.
e dividend is taxed at the hands of each beneficiary recipient, thereby
taking advantage of lower tax brackets and potentially minimizing
