What is a Family Trust?

The typical structure of a family trust is when you own the shares of your corporation in a holding company that acts as a third party between your family and your corporation.

When you pass away, any properties that you own including shares, are deemed to be sold and reacquired at a fair market value. That means you have to pay taxes. However, if the shares are being held in a trust, then there will be no deemed disposition and no taxes are applied.

 

Also, when the family trust sells shares to a third party, a capital gain can be allocated to each beneficiary meaning your spouse and children can also claim the lifetime capital gain exemption, not solely you as the business owner.