U.S. Citizens And Canadian Trusts

Trusts are important tools in Canadian tax and estate planning. Discretionary family trusts, in particular, have become common and are continually evolving. Some of the most powerful benefits of these tools include:

• Flexibility – the ability to maintain control of assets while directing income and value as the trustees see fit.
• Income splitting – directing income of the trust to lower-income beneficiaries (usually family members) to minimize the overall family tax burden.
• Capital splitting – allocating capital gains to beneficiaries, enabling the use of multiple capital gains exemptions.

Trust use is even more common in U.S. tax and estate planning, but for different reasons. In fact, many of the typical planning strategies deployed in Canada are not effective – and may in fact be punitive – under U.S. tax law.