Spotlight: Wealth Structuring and Regulation in Canada By: Margaret R. O’Sullivan and Marly J. Peikes O’Sullivan Estate Lawyers firm in Toronto, Ontario, provide an overview of major estate planning techniques currently utilized in Canada, and discuss issues which are both very familiar and very different from what estate planners face in the United States. Wealth structuring and regulation i. Common vehicles for wealth structuring Trusts and holding companies are perhaps two of the most common vehicles used in wealth structuring.
TrustsIncome splitting Trusts can be established inter vivos or by will. Inter vivos trusts are often used to split income with family members, where the trust earns income and acts as a conduit to allocate income, including taxable capital gains, among beneficiaries who are subject to lower rates. Effective planning involves careful attention to the possible application of the attribution rules, which can attribute income back to a high-tax rate taxpayer. Trusts used in conjunction with an ‘estate freeze’ Trusts are also commonly used in conjunction with an estate freeze to hold growth property for future generations, such as common shares of a private company that are expected to grow in value, and thereby defer taxation on any gains until the future rather than until the death of the founder. This can achieve significant tax savings. The use of a trust can allow for control of the timing of distribution of property, for selection of beneficiaries and for general wealth protection purposes. Generally, a fully discretionary trust is used for such purposes. Trusts as will substitutes Trusts are also increasingly used as will substitutes, in particular ‘alter ego’ and ‘joint partner’ trusts that are
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