Trusts continue to be widely used in today's estate and financial plans. Different trusts are set up for various reasons. Examples include testamentary trusts in wills to ensure adequate income to the surviving spouse and discretionary trusts used to spread income to several beneficiaries. Where a person wishes to transfer property to a named beneficiary as part of an estate plan, a trust provides an excellent vehicle for this purpose. In the case of capital property, tax on the capital appreciation within the trust is deferred until disposition.

The rules pertaining to the lifetime capital gains exemption of $500,000 are very specific. The total lifetime exemption of $500,000 includes any amount of the $100,000 lifetime capital gain exemption that was available to offset capital gains on most types of capital property prior to February of 1994.

The taxation of private corporations in Canada is based upon the principle of integration. Income earned by a private corporation and distributed as a dividend to its shareholders is subject to approximately the same amount of tax as if the income had been earned directly by the shareholders.

Careful estate planning can help reduce the tax liability that may arise on your death and help you leave as much as possible to your beneficiaries. Trusts often play an important role in this planning.

Two new types of trusts, called "alter ego" and "joint partner" trusts, can offer flexibility in structuring your affairs and controlling the future use of your property. This Canadian Tax Letter discusses the pros and cons of using these trusts for estate planning.

The lifetime capital gains exemption continues to be a significant and sometimes confusing issue to address when establishing a business or succession plan for a small business owner. The purpose of this release is to summarize the rules with particular comment on corporate-owned insurance in relation to the use of the exemption.

When one hears about "estate freezes," "estate thaws" and "partial freezes" the lay man may wonder if he or she is listening to a weather report instead of tax planning terminology.

Estate freezing refers to the procedure of placing a limit on the growth of an asset in a particular person's hands and passing on the expected future growth to the next generation. An estate is said to be frozen when a taxpayer exchanges appreciating assets for fixed-value assets.

Use of holding companies
In many cases, individual shareholders choose to hold their operating company (Opco) shares through one or more holding corporations. There are tax and commercial advantages in using this simple strategy.

An Alberta-based sheet metal manufacturer who had operated two successful companies supplying oil patch industries for 27 years was sure he didn't need a Registered Retirement Savings Plan (RRSP). "When I'm ready to retire, I'll just sell my business and live comfortably off the proceeds." he thought. However, when the Alberta economy suffered a downturn after the introduction of the National Energy Program, his market diminished. Four years later he was bankrupt, without a pension plan or funds to reestablish himself.

He's not alone. Many others who have maintained steady, profitable businesses for years have discovered, much to their dismay, that where the market is depressed they can't sell their companies for enough money to retire on.

Planning to meet the needs of children or adults who have special needs is often complex. Special financial planning techniques may be needed so you don't jeopardize any government benefits they may be receiving.

At the 1993 Great-West Life Conference in Winnipeg the topic which received much attention was the use of discretionary family trusts for corporations. The topic of trusts in general is addressed in Advanced Sales Release 91-10. A glossary of terms is included in the commentary. Trusts are governed by provincial law so in respect of certain planning issues, the rules will vary from province to province. In discussing this concept consultation with professional advisors familiar with the use of trusts in your province is necessary. For example, life insurance and annuities are not valid investments under most provincial Trustee Acts so in this even specific provisions need to be inserted in the trust document to broaden the investment powers of the trustee.

In the next two decades, close to one trillion dollars of net worth in Canada currently held by the older generation will transfer to the next generation. With a good portion of this wealth held in the assets of family-owned businesses, succession planning has become very important for all businesses that are committed to preparing for their future success. It involves a formal process of transferring the ownership and control of the business from one generation to the next.

Not all Assets are Created Equal:
Factors to Consider when purchasing an Investment

In recent years, increasing attention has been given to the use of retirement compensation arrangements (RCAs) to provide a supplementary income plan for key employees.

Succession Planning:
Exit Strategies for the Private Business Owner

Here is an article about the importance of remaining diversified. Given the strong returns in the Canadian market, it is tempting to want to invest all our money in Canada; here's the case to remain diversified globally.