Family trust

A family trust is a legal agreement that places assets (often company shares) in the hands of trusted individuals, the trustees, who are responsible for managing them for the benefit of the family, the beneficiaries. The person who creates it is the settlor. It serves to prepare for succession and protect the family's assets.

Brief

Three roles: the settlor (who creates it), the trustees (who manage it) and the beneficiaries (often the family, who benefit from it)
Often coupled with a freeze on inheritance (freezing the current value of the company) to capture future growth
The 21-year rule: every 21 years, the trust is deemed to have sold its assets, which may create a tax liability.
She files her own income tax return each year (T3 forms federally and TP-646 in Quebec)

Why does this matter?

Think of a trust as a family safe managed by trusted individuals: the business deposits its future growth, and later, with flexibility, which family member will benefit. For a Quebec entrepreneur, it's primarily a succession and protection tool: it can capture growth after a freeze, maintain flexibility over who receives what, and sometimes extend the capital gains exemption (the tax savings upon sale) to several family members. But it comes with real obligations: annual returns, tax rules to follow, and the 21-year maturity date to plan for. If poorly managed, it loses its advantages. We're here to support you: Bankeo will introduce you to a verified accountant or CPA (Chartered Professional Accountant) free of charge to determine if it's right for you.

Frequently asked questions

What exactly is a family trust?

This is a legal agreement in which a person, the settlor, entrusts assets (often company shares) to trustees who manage them for the family, the beneficiaries. In business, it is primarily used to hold growth shares after an estate freeze: the trustees retain control and choose who receives the remaining shares. It can also protect certain assets and facilitate the sale of the company.

What is the 21-year rule?

Every 21 years, the law gives the impression that the trust sells its assets at their current value, which can trigger a significant tax burden all at once, even without an actual sale. Therefore, planning is essential before this deadline, often involving the transfer of assets to the beneficiaries. This is a date to mark on the calendar as soon as the trust is established.

Is a family trust profitable for me?

It has setup costs and annual maintenance, so it's only justified when the stakes are high: a growing business, succession planning, or an impending sale. A professional will assess whether it's worth the investment. We're here to support you: Bankeo will connect you with a verified accountant or CPA free of charge to analyze your situation.