1Q 2023: Something in Everything

The business does not come from a tactical initiative in a marketing pitch from a five-year strategic plan!!!

We simply had to learn many things as trustees and realised that we both had a passion and a natural ability to pull it together – a knack for it of sorts.

It is to the extent that looking back, that might have been a better early career choice – at least for me. When managing our own family trust, there was some bouts of frustration: there is little if no continuum for the complete process i.e., can’t someone take this from intent to execution?

For small family trusts, the market is such there it is a bit of a piece meal approach. Large trusts might not have this hurdle, as relative fees become less important, and a big law firm will happily perform all the work needed. As far as we see it, this helps understand who are our clients and defines which families we work with.

Trusts can be such an interesting vehicle for efficient tax management that many more could use it. Maybe it sustains a parent in their golden years or put a grandkid through after school program. The possibilities are numerous. In essence, we are using a trust to move some of the after-tax dollars to a more favorable tax position. As such, the family can pay for these activities with a dollar that is more tax efficient, as long as that dollar already exists.

I had a good friend tell me that trusts are only for families with a lot of disposable assets. Maybe but also maybe not. It depends and I always veer away from determining how much is needed.

Wealth is something that’s only defined by you (maybe also by your family but mostly by you). It also changes with time. How such wealth is used is also a matter of preference and one might elect to direct resources differently to another. These choices, combined with the significant assets owned by Canadians, could be used in a more tax efficient manner. Each case is different and to dismiss a trust offhand is at times premature.

I might say it clear: there is no magic wand that will create assets out of Ether. Maybe your family had decided that a daughter that would attend medical school would be financially supported. Maybe your grandson has a talent in violin and would greatly benefit from additional teaching that you wish to pay for. If there is a plan to pay for someone’s endeavor and that person is in a lower tax bracket than the financial interest holder: there might be a case for such Trusts.

Next Quarter I will touch on asset protection from a financial interest holder’s perspective.