The creation of a family trust with family members as beneficiaries may provide income splitting opportunities in situations where trust beneficiaries (typically children) are in a lower marginal income tax bracket than that of the transferor (generally the parent or parents).

We must emphasize that the rules in this area are quite complex. For example, depending on the nature and source of the income, income may be attributed back to the transferor parent for income tax purposes even though a family trust has been set up for children to beneficially earn the income.

Ideally, an owner/manager of a corporation earning active business income (as defined in the Income Tax Act) may be in the most ideal situation to effectively use a family trust for estate planning and income splitting purposes.

We strongly suggest that you consult with a professional advisor if you would like more information on this topic.

The above provides general information only. It should not be regarded or relied upon as accounting or taxation advice or opinions. Logan Katz LLP Chartered Accountants would be pleased to provide more information or specific advice on matters of interest to you.
 

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