Family Trusts - an Effective Tax Strategy
The last Finer Focus article discussed income splitting with family members using prescribed rate interest loans. This issue continues the income splitting theme; we discuss how a business owner can use a family trust to split income with family members.
Quite often, when people hear “trusts”, they think of the Bronfmans or the Irvings; however, trusts can be used by small and medium-sized family businesses and result in significant tax savings. This article will discuss the following trust topics:
-the legal concepts;
-benefits;
-set-up costs and ongoing costs
-potential pitfalls on implementation;
-the use of a trust in a family business context;
-and a case study illustrating the tax savings opportunities.