Section 10 – Estate Planning


As the average life expectancy of Canadians is increasing, retirement income requirements must be planned with care. With this in mind, taxpayers planning on carrying out an estate freeze are often concerned that their assets may not be sufficient to ensure they will be comfortable when they retire. When freezing the value of a business, taxpayers must consider whether they will have enough income to retire and maintain their desired lifestyle.

Using a trust as part of an estate freeze can allow you to undo the freeze if you have any regrets as a result of economic conditions.

In the current social context, taxpayers are also looking to trusts as a vehicle that will help protect their spouse, children and even living and future grandchildren. However, it is very difficult to provide for the needs of relatives. Certain children may have special needs that are impossible to predict today.

In addition to family members who are alive when a trust is created, family members who are born during the term of the trust can also be named as trust beneficiaries.

A discretionary trust makes it possible to defer the specific identification of beneficiaries. Trustees of such a trust may exercise their discretion annually to determine how beneficiaries will share trust income and capital1.

If you wish, the trust may give the trustees powers to benefit certain beneficiaries from time to time, to the exclusion of others, at their sole discretion.

Business owners often feel a child may not be completely ready to take over. Accordingly, they may want to continue making decisions without any interference. They do not want to have to ask for permission for every decision they make and want to retain control over both the selection of their beneficiaries and the selection of those who will administer their property following a freeze of their business. All these factors should be considered when doing an estate plan and it will be extremely important to have a properly worded trust deed, will, and shareholders’ agreement.

1  Income attributed by a family trust may be taxable at the maximum marginal rate rather than the progressive rates applicable to individuals as a result of the rules limiting income splitting (see Section II).
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