Are family trusts being used to avoid the payment of taxes by the wealthy?
No. Family trusts are arrangements used to transfer property (for example, a family business or real property) to one or more members while trustees maintain control of the property. Trust arrangements are often used where beneficiaries are unable to manage the property for themselves, for example, because they are minors or disabled. To ensure that all trust income is taxed appropriately, the 1995 budget eliminated an income-splitting opportunity by announcing the end of a measure that allowed undistributed trust income to be taxed in the hands of beneficiaries, except in the case of beneficiaries who are mentally or physically impaired. The 1995 budget also cancelled provisions which allowed trusts to defer paying taxes on capital gains for long periods of time. As a result, tax advantages associated with family trusts have been eliminated. The income of trusts paid out to beneficiaries is taxed in their hands. The undistributed income of trusts, except for trusts created under an in
