Family Trusts:
Powerful. Misunderstood.
A family trust is one of the most powerful tax and estate planning tools available to Canadian business owners and high-income families. Used correctly, it can split income across multiple family members, multiply your Capital Gains Exemption, and protect assets from creditors — all within the law.
LCGE per Beneficiary (2025)
$1.25M
Qualifying small business shares
Income Splitting
6 Members
Up to 6 beneficiaries
21-Year Rule
Planning
Required before deemed disposition
Asset Protection
Strong
From creditors and divorce claims
The Three Core Benefits of a Family Trust
A well-structured family trust delivers tax savings, asset protection, and succession planning in a single structure.
Income Splitting
The trustee can distribute trust income (dividends, capital gains, interest) to lower-income beneficiaries who pay tax at lower rates. A family with four adult beneficiaries could shift significant income from the top 53% bracket to the 20-30% range — saving tens of thousands annually.
Capital Gains Exemption Multiplication
Each individual beneficiary of a family trust holding qualifying small business corporation shares may be entitled to their own $1.25 million Lifetime Capital Gains Exemption. A trust with a spouse, adult child, and parent as beneficiaries could potentially shelter $3.75 million of capital gains tax-free on a business sale.
Asset Protection & Estate Planning
Assets held in a trust are generally protected from personal creditors of the beneficiaries. The trust also allows you to control how and when assets pass to the next generation — preventing beneficiaries from receiving large inheritances before they are financially mature.
Estimate Your Family Trust Tax Savings
See how distributing income through a family trust reduces your household's overall tax burden.
Family Trust Income Splitting Estimator
Estimate how much a family trust could save by distributing income among multiple beneficiaries at lower tax rates.
Note: Minor children are subject to TOSI rules at the top rate
Income Splitting Analysis
Annual Tax Savings via Trust
$32,350
*Based on simplified Ontario rates. TOSI rules, 21-year rule, and trust setup costs apply. Consult a CPA.
This tool is for general information only and does not replace professional tax or accounting advice.
How We Structure a Family Trust
Eligibility & Goal Assessment
We review your income, assets, family structure, and long-term goals to determine if a family trust is the right strategy and what type (holding company trust, testamentary trust, etc.) best fits your situation.
Corporate Structure Integration
For business owners, we typically integrate the trust as a shareholder of your operating company — allowing dividends to flow through the trust to family members at their lower tax rates.
Section 85 Rollover (if applicable)
If transferring existing shares into the trust, we use a Section 85 rollover to defer any capital gains on the transfer — ensuring you don't trigger a tax event simply by setting up the structure.
Trust Document Drafting
We work with your legal counsel to draft the trust deed — defining the trustees, beneficiaries, distribution powers, and investment mandate. The legal document must be airtight.
Annual Administration
We file the T3 trust tax return each year, calculate the optimal distribution to each beneficiary, and ensure compliance with TOSI rules, the 21-year rule, and beneficial ownership reporting requirements.
The 21-Year Rule: Plan Early
One of the most important — and most commonly neglected — aspects of family trust planning is the 21-year deemed disposition rule. Every 21 years, the trust is deemed to have sold all its capital property at fair market value. The resulting capital gains are taxed inside the trust at the top marginal rate.
For trusts holding shares of growing businesses, this can create an enormous unexpected tax liability. We begin planning for the 21-year reset well in advance — typically 3-5 years before the deemed disposition — by distributing assets to beneficiaries in a tax-efficient manner.
Beneficial Ownership Reporting Requirements
As of 2023, express trusts (including family trusts) must file a T3 return and disclose beneficial ownership information — including settlors, trustees, and beneficiaries — even if there was no income. Failure to file carries penalties of $25/day up to $2,500 per year. We handle all T3 filings.
Why Choose Teixeira Accounting?
At Teixeira Accounting Firm Inc., we don't just record history; we write your financial future. Most accounting firms are reactive—they wait for you to bring them problems. We are proactive architects of your wealth and business growth.
Whether you're a scaling enterprise or a high-net-worth individual, we provide the strategic oversight, tax optimization, and bulletproof compliance you need to operate with absolute confidence.
The Teixeira Advantage
Proactive Tax Strategy
We don't just file your taxes; we actively look for ways to reduce your tax burden year-round.
Bulletproof Compliance
Our rigorous quality control ensures your filings are accurate, minimizing audit risk.
Dedicated Advisory
You get a dedicated partner who understands your business deeply, not just a once-a-year tax preparer.
Family Trust Planning — FAQs
Keep More in the Family.
A family trust isn't just for the wealthy — it's for any family with a business, investments, or a desire to build generational wealth efficiently. Book a consultation to see if it makes sense for you.
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