Lifetime tax planning

Should I set up a family trust?

You want your family to share in the growth of your business. You also need enough money and control for your own future. A family trust can hold shares for family members, with trustees managing them under the trust’s rules. Giving family members shares directly is another option.

See what changes the picture

The part worth a closer look

You can plan for future growth separately from what you have built.

Protect the founder

What do you need to keep?

Retirement security and appropriate control come first. A family plan starts with a realistic view of the business and the owner’s needs.

Current value
Founder’s needs
Appropriate control

Decide who benefits

A trust is one option, not the objective.

Family members owning shares directly may be simpler. A trust can offer choices, but it costs money to set up and run. It can also face a tax bill around year 21, even without selling its assets.

Future growth
Family members’ rights
Costs and timing

This example explains the choices. Owning shares directly and using a trust have different costs, rights and tax rules. No tax savings from a trust are estimated here.

What this could mean for you

Plan ownership while you still have choices.

An owner expects the business to grow before selling it or passing it to the next generation. How much of that growth should belong to family, and how much does the owner need to keep?

Protect what the founder needs.

A family ownership plan needs to fund the founder’s retirement and preserve appropriate control. Sharing future growth is a real economic decision, not just a tax calculation.

Compare a trust with direct ownership.

A qualifying trust may allow eligible gains to reach beneficiaries who can use their own exemptions. Direct family ownership is another route to assess. A trust does not create extra personal exemptions by itself.

Plan for the trust’s clock.

At the 21-year mark, many family trusts are treated as if they sold certain assets for tax purposes. This can create tax even without a sale. Plan for that date, annual filings, costs and where the family members who benefit live.

An estate freeze and an exemption claim are different events.

An estate freeze can let the owner keep today’s business value while others share in future growth. It does not by itself create cash, claim a tax exemption or give existing value to family. Check the value, share rights and tax rules. Some rules can tax income in one person’s hands even if another receives it.

Questions worth answering early.

Who should benefit from future growth, and who should keep control?
Is there enough future growth and flexibility to justify a trust’s cost?
How do the expected sale date and 21-year date interact?

Sources and limits of this example

Income Tax Act: trusts and beneficiary designations
Income Tax Act: capital gains deduction
CRA: split-income rules for adults

Tax rules checked September 29, 2026. This is a general example. The sources explain the rules, but cannot tell you what your family would save. Your situation, costs and future tax rules can change the result.

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The decisions connect.

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