Your success has enabled you to build up a comfortable nest egg. Are you taking full advantage of the opportunities available to make sure that your property is managed according to your directions, or transfer assets to your family or a charitable organization during and after your lifetime?
If not, consider setting up a trust. Below are five ways that you can benefit from trusts.
|1.||Are you looking to reduce your current tax bill?|
|A discretionary family trusts provides flexibility in distributing income amongst beneficiaries in different tax brackets. If structured carefully, you can take advantage of a family member’s lower marginal tax rate on income that would otherwise be taxed in your hands at the highest marginal rate, i.e. you can deflect income away from you to family members who are “poorer”.|
|2.||Do you own a business and want to limit the future capital gains tax payable by your estate?|
|By restructuring the shareholdings of your company and a family trust, you can cap your future tax liability. All future growth of the business would accrue to the shares held by the family trust.|
|3.||Are you interested in reducing future tax bills for your family?|
|Instead of leaving your assets directly to your spouse or adult children, bequeath them to testamentary trusts for their benefit. Income earned by these trusts is taxed at graduated rates. The family continues to receive all the annual income of the trust and has access to the capital, while benefiting from the tax savings.|
|4.||What strategies are available to avoid or minimize probate fees?|
|The Ontario government charges a fee to probate a will; the highest rate has been 1.5% (applicable to estates over $50,000). Transfer your property to a “living trust”, and you can eliminate or minimize the probate fees levied on your estate.|
|5.||How do you provide for the next generation after your death?|
|Minor children (or grandchildren) or incapacitated dependants do not have the legal capacity and appropriate knowledge to own or manage their inheritance. A testamentary trust incorporated into your will ensures that property is held and managed for them long after your death.|