A family trust is a discretionary trust that holds assets, often shares of a private corporation, on behalf of family members, enabling LCGE multiplication, intergenerational wealth transfer, and limited income-splitting flexibility.

In a typical structure, a family trust holds common shares of the operating company. The trustee has discretion to allocate income and capital gains among the beneficiaries, usually the owner, spouse, adult children, and sometimes a holding company. That discretion creates planning flexibility, although income splitting is now limited under the Tax on Split Income (TOSI) rules.

The LCGE multiplication benefit is significant. Where properly structured, multiple beneficiaries can access their own exemption, allowing a share sale to shelter a multiple of the individual limit. Post-2018 TOSI rules have constrained income splitting to situations where beneficiaries meet specific involvement or ownership criteria, but capital gain allocation remains one of the most powerful planning tools available.

Trust structures require careful governance, annual trustee resolutions, proper documentation of distributions, and T3 filings to remain defensible.

A family trust structure built correctly provides decades of tax planning flexibility. See how Wefinx approaches tax planning.

← Back to glossary