MortgageBroker mbabc.ca spring 2015 | 35
taxes paid by the family unit. When
income splitting, consult with the company
accountant for a careful consideration of
attribution rules in the Income Tax Act.
Asset Protection: As mentioned
previously, if a trust is fully discretionary,
then the benefi ciaries are not the legal
owners of the trust property. ey do
not have the absolute right to receive any
income or capital from the trust. erefore,
if any of the benefi ciaries face fi nancial
diffi culty in the future, any creditor who
obtains a judgment against that benefi ciary
will have no claim to shares owned by the
trust. If that same benefi ciary had instead
purchased personal shares of your business,
the creditor could potentially make a claim
against those shares – and let's be honest,
no one wants to work alongside a bank's
receiver! Additionally, if, as a personal
shareholder, that benefi ciary attempts to
transfer shares out of his or her personal
name, that transfer could be set aside if
the property was transferred in an eff ort to
defeat legitimate claims of creditors.
Avoiding Probate: If a family trust is set
up irrevocably, it may provide a way
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.
