Family Trust Lawyers in Calgary

Family trusts are popular options for families with large assets, business owners and entrepreneurs in Calgary.

As well as potentially providing significant tax advantages, family trusts can help you transfer wealth to your children effectively and securely, in addition to protecting assets from creditors.

The family trust experts at Vest Estate Lawyers – Calgary, can advise on the establishment of a family trust and help create your trust agreement.

What is a family trust in Alberta?

A family trust, like all trusts, is a legal entity that holds assets or property on behalf of third-party beneficiaries rather than those assets belonging to the person who transferred them.

Trusts are flexible options that can be established in many ways. The one thing that all family trusts share is that they protect the interests of family members – though the term “family trust” does not have any legal meaning.

Who are the main stakeholders in a family trust?

The main stakeholders in a family trust are the same as in any trust:

• The settler – the person who creates the trust by transferring assets (usually no relation to the beneficiary).
• The trustee(s) – representatives who are the legal owners of the trust’s assets, managing considerable responsibilities including but not limited to allocating assets to beneficiaries according to the trust agreement, financial accounting, and tax filings.
• Beneficiary/beneficiaries – those who receive the assets from the trust (income/capital) – for instance, family members holding shares in a family business; an inheritance or fund for the purpose of education, maintenance and support.

Is a family trust the same as a company?

A family trust operates like a company or management firm – and has some similar tax benefits.

However, an important difference is that assets held in a family trust cannot legally be seized as part of a lawsuit or bankruptcy unlike company shares – unless the trust was set up fraudulently.

Also, trustees in family trusts remain in their position until the trust is wound up, unless the document stipulates the requirements and or allowances for the appointment of a new trustee.

The position is not reviewed annually like with management firms and therefore careful thought and consideration should be made when deciding who to entrust with role of trustee to manage your assets.

What are the main benefits of starting a family trust in Alberta?

Family trusts are an attractive option for many entrepreneurs, due largely to the following benefits:

Effective transfer of wealth for children

A family trust set up in the right way is an effective wealth-transfer tool for family members with significant assets, including farming and private businesses. The trust agreement can specify exactly what the beneficiaries are entitled to and when.

This is an effective way to ensure that your children or grandchildren end up with the financial assistance you intend without having to transfer the assets directly to them immediately.

It is also an effective way to look after the ongoing financial needs of a disabled child or a child with special needs, while alive or after passing away when structured properly.

Lower taxes

A key reason for starting a family trust is the potential tax benefits.

Trust property is not considered part of the settlor’s estate. The estate and ultimately the beneficiaries, pay lower estate taxes upon the death of the settlor than if the property was simply transferred in a will.

Capital gain taxes can often be shared amongst multiple shareholders in a family trust. Some families may want to consider establishing a trust in another province to take advantage of lower tax rates than in Alberta.

Income-splitting benefits

Lower taxes can also be achieved by income-splitting within a family trust. This is commonly done when there is a family business and the company shares are transferred to the trust.

The trust can be used to allocate taxable income to multiple beneficiaries, thereby reducing the overall amount of tax to be paid.

Asset protection

Assets held in trusts are not subject to claims for payments from creditors in a lawsuit or during bankruptcy proceedings for a beneficiary.

If a beneficiary’s interest is threatened by creditors of the beneficiary, the trustee can simply refuse to make any distributions to that beneficiary, blocking the claim.

Note, however, that you cannot create a trust immediately before you file for bankruptcy or otherwise for fraudulent purposes. A judge is likely to overrule any block to a claim, removing protection for your assets.

Confidentiality

Family trust information generally remains private and confidential and there is no requirement for the stakeholders to acknowledge their relationships with each other.

The contents of a will, on the other hand, may become public during the probate process in the Calgary courts.

The exception to the confidentiality of family trusts is when a dispute arises and requires a litigated resolution.

Are there any disadvantages of family trusts?

In most cases, there are very few disadvantages to setting up a family trust. However, properly.

Deemed Disposition (21 year rule)

Some people are put off by the fact that a family trust must “dispose” of its assets on the twenty-first anniversary of its settlement and every 21 years thereafter. This is mandated to force a distribution of trust property to the beneficiaries or have taxes triggered, potentially resulting in Capital gains tax. However, taxes can be legally avoided depending on the trust structure and form of asset distribution to the beneficiaries.

With careful planning, a family trust can be an extremely tax-effective way to manage and transfer assets but it must be carefully administered by the trustee. Tax returns must be filed and taxes must be paid on income generated by the fund. Minutes of meetings must be taken and financial statements produced.

Loss of Control

Once assets are transferred into a trust, they are no longer legally owned by the contributor. While you may act as a trustee, you must exercise your duties in the best interests of all beneficiaries. This fiduciary responsibility can limit your personal discretion over how the assets are managed or distributed. This is why the selection of an individual for the role of trustee is so important.

Attribution and TOSI

The Canada Revenue Agency enforces strict rules to prevent inappropriate income splitting. Attribution rules can result in income being reassigned and taxed back to the original contributor, while the Tax on Split Income (TOSI) rules can significantly limit or eliminate the benefits of allocating income to family members or those not actively involved in a family business.

Professional advice is critical to structure distributions appropriately and avoid unintended tax consequences.

How do you establish a family trust in Alberta?

A family trust is a living trust (also known as an inter vivos trust) as opposed to a testamentary trust, which is established upon death.

It is established by a trust agreement or deed signed by the settlor and the trustee. This becomes the main document of the trust, specifying the identity of the trustee and the beneficiaries and directing the trustee in his or her obligations and responsibilities. It also provides instructions regarding the trust property and how the beneficiaries are to receive distribution.

While the process of establishing a family trust is quite straightforward, many of the decisions you will need to make before establishing the trust, are not. You need to consider your options and possible tax implications carefully before creating a trust.

What is the process for creating a family trust in Alberta?

Setting up a family trust is more than filling in forms—it’s a legal structure that must be created and managed with care. Our team drafts the trust deed, brings the trust into legal existence with a proper settlement, and supports trustees with ongoing compliance.

How Vest Estate Lawyers Set Up Your Trust

1. Draft and execute the trust deed
   • Our team will prepare a comprehensive trust agreement that defines the trust purpose, beneficiaries, trustee powers and duties, and distribution provisions—then ensure it’s executed in accordance with provincial formalities.
2. Create the trust with an initial settlement
   • Our team can facilitate and guide the settlor’s irrevocable initial transfer (often a nominal cash amount) to bring the trust into legal existence. We document this carefully so the trust property is clearly established from day one.
3. Set up tax and reporting
   • A CRA trust account number is created (if required), ands our team will guide you with key deadlines explained, including T3 returns and slips are needed—so you understand your annual obligations before they come due.
4. Open a trust bank account
   • Guiding the trustee to ensure a dedicated bank account in the trust’s name is established, to keep funds segregated and books clean.
5. Transfer and title assets to the trust
   • Whether cash, investments, private company shares, or (where appropriate) real property, our team assists with the preparation of required assignments, consents, and title/registry updates to evidence the transfer properly.

The family trust experts at Vest Estate Lawyers in Calgary are here for each step in establishing your trust.

Are you considering a family trust?

Because of the complexities involved in formulating trust agreements that accurately reflect your goals, it is best to consult legal counsel before establishing a family trust.

Vest Estate Lawyers can advise and set up your trust the right way. Providing the guidance needed to properly establish and administer to avoid common pitfalls that can be overlooked without proper legal guidance.