Family First

What’s a Trust? Do you need one? Why do you have one? Why is your accountant or lawyer recommending you have another one? In this Holland Report we share a series of RBC Wealth Management articles filled with tips, tools and considerations to complement your tax, wealth and legacy planning. Please see a brief description and summaries below, and reach out if you'd like the full article.

A trust is a legal relationship in which the legal ownership of assets (the authority to manage or dispose of the assets) is separated from the beneficial ownership (the right to enjoy the assets). A trust is not a separate legal entity like a company, although it’s treated as a separate taxpayer for tax purposes. There are many ways to set-up a trust, and it may be used to achieve various goals. The list below is illustrative, not exhaustive.

• – Living Trusts : A living trust, or family trust as it’s frequently referenced, can be an effective wealth planning tool for a variety of purposes, such as business succession planning, supporting family members and charitable giving.
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• – Using a Living Trust for a Prescribed Rate Loan : a family trust can be used to implement a prescribed rate loan income-splitting strategy to help reduce a family’s tax burden. This strategy involves loaning money to a family trust at the CRA’s prescribed interest rate in effect at the time the loan is made. It’s backed by a loan agreement so that the borrowed funds can be invested to generate income taxed in lower-income family members’ hands. This strategy was quite popular several years ago when interest rates were lower, though may make a comeback as rates continue to decline.
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• –  Testamentary Trusts : In contrast to a living trust, a testamentary trust is created as a result of the death of an individual. This type of trust is an alternative to an outright distribution of estate assets (typically by Will). It’s often used to protect young beneficiaries or beneficiaries with special needs. It can also be a useful tool to preserve continuity of ownership (such as recreational property) or when planning for blended families (when spouses have children from different relationships).
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• –  Alter Ego & Joint Partner Trusts : An alter ego trust is a type of living trust set-up by someone over age 65. The person for whom the trust is created is the only person who can receive income from the trust while alive. On death, the trust assets are distributed as outlined in the trust document. As a result, this type is of trust may also complement a Will or act in substitution of a Will. The advantages of an alter ego trust range from probate reduction, privacy and possible protection from estate litigation.

Market Moment

• – RBC Global Investment Outlook - Spring 2025 : Uncertainty abounds as the trade war threatens economic growth, complicates the outlook on inflation, and stokes financial-market volatility, causing investors to weigh a wide range of possible outcomes.
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• – Uncertainty Weighs on the U.S. Federal Reserve : The Fed kept interest rates on pause at its recent meeting as it too awaits clarity on trade policy.
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• – Bank of Canada Policy Update : Meanwhile, the BoC opted to cut rates as trade tensions mount.
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• – Canada’s Housing Market Retreats Amid Trade War : The threat of U.S. tariffs has become top of mind for those considering buying or selling a home in Canada. Concerns about the significant damage that hefty tariffs would inflict on the economy has prompted many buyers and sellers to hit pause.
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• – Reorienting Canada’s Economy in a Changing World : The latest tensions with the U.S. should jolt Canadians into seeking an economic trade reboot. Trade Hub, RBC Thought Leadership’s new digital platform, aims to highlight opportunities for Canada in this new economic order. Key areas where Canada can leverage strengths are examined, including agriculture, energy, critical minerals, and manufacturing supply chains.

Team Touch

In response to recent capital gains reporting changes, the CRA has extended the deadline for issuers to provide data required for certain tax slips. As a result, some T3/R16/NR4 and T5013/RL15/NR4 tax slips will only be available the second half of March. Alex, Breanna and Kevin are regularly monitoring slips and contacting you and/or your tax advisors to provide timely updates. Thank you for your patience, and much love to all our tax colleagues!

OUT OF OFFICE ALERT

*** Breanna is in Toronto March 21-26 (attending an RBC conference)

*** Kevin will be traveling to Hawaii April 7-11 (his first visit to the Aloha state)

*** Alex will be in Barcelona April 16-23 (his last trip as a single man)

*** Warwick and Lisa will be in Athens/Istanbul from April 28-May 12 (Athens for an RBC conference and Istanbul for vacation)

Chart Corner

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With appreciation,