Succession Planning, Estate Freezes & Family Trusts

Vaughan Divorce Lawyers for Succession Planning, Estate Freezes, & Family Trusts

Some families require more in-depth planning than simply setting out their intentions for spousal support or property division in a marriage contract or cohabitation agreement. For example, if you or your spouse run a family business, planning for the future of the business will also be an important consideration. Succession planning allows a business owner to predetermine the future of the business’s ownership, while also saving on business taxes through strategies such as an estate freeze.

Family trusts are commonly used to protect both individuals and various types of property. A trust is a legal entity created to hold property for the benefit of another person or organization. Trusts can be used for a variety of reasons in a family law context, such as establishing long-term support for family members who require ongoing care, tax planning, business succession planning, or keeping the value of certain assets out of the equalization calculation in the event of a divorce.

At Bortolussi Family Law, our lawyers are experienced working with families who require complex planning tools to protect their investments and their family members. Understanding the legal implications of a family trust or estate freeze, whether you are looking to protect investments before marriage or moving in with a partner, or at the time of a separation or divorce, is critical to protecting your interests. We regularly help families establish creative and custom-tailored solutions designed to protect the people and property most important to them.

Business Succession Planning & Estate Freezes

Business succession planning is developing a strategy for either selling or passing on a business to another person, such as a child or an employee to ensure a smooth transition to protect the interests of the business owners and the beneficiaries of these legal transactions. Our lawyers work closely with your corporate legal counsel, accountants and estate planning counsel.

An estate freeze is a legal tool that enables a business owner looking to transition the future growth in their business to a child, and consequently, defer the taxation of the growth in the company to a later date.

Planning for the future of your business is crucial in order to protect against unnecessary loss and to secure the business for the next generation. For business owners looking to transfer the family business to one or more of their children, an estate freeze can provide protection for all parties.

From a tax perspective, an estate freeze allows the parents to freeze the value of their interest in the business and defer any taxes on growth of the business to the next generation. This can be especially helpful to parents who are looking to step back from the business and focus on retirement while transitioning the company to their children.

Using Estate Freezes to Protect Assets in a Divorce

An estate freeze also allows the children to protect their newly acquired interest in the business with respect to their own relationships or marriages. The value of a business is generally included in the equalization of net family property, however, by transferring shares through an estate freeze during the time that a child is married, these assets can, when properly documented, be treated as a gift, which will be excluded from the calculation if and when they find themselves going through a divorce.

If the child is single at the time the interest is transferred, s/he would only, in the absence of a domestic contract, be able to deduct the value of their interest at the date of the marriage, while any growth in the value of the business during their marriage may still be included in a future equalization calculation. If the shares are transferred to the child after the child is married, the entire value of their interest can be excluded from equalization by virtue of the gift. All of this requires careful planning and advice from an experienced family law lawyer to ensure property is transferred in such a way that it retains its exclusion.

Family Trusts

Family trusts can be used for a variety of reasons to protect both people and property. A trust enables a family to place certain assets in the care of a third party, to be distributed to the trust’s beneficiaries as instructed. In a family context, trusts are commonly used for the following reasons:

  • To benefit a vulnerable family member. Many families are concerned with the long-term financial care for a family member who is unable to care for themselves. This may be due to their young age, or because they have physical or cognitive disabilities requiring long-term financial support. A family trust can be created to provide income to a vulnerable family member for a fixed period, or for their lifetime, ensuring they won’t face financial insecurity even if they survive those who are providing for them.
  • To help facilitate the succession of a family business. A family trust can be used in conjunction with an estate freeze to hold and manage assets, including a family business in a manner which is meant to continue the business legacy and growth and to manage the benefits of the family business for the named beneficiaries.
  • To protect certain assets from inclusion in the equalization of family property. When property is equalized in a divorce, assets owned by the spouses must be included in the calculation. The use of the family trust can limit the assets to be included in this calculation.

Contact the Divorce Lawyers at Bortolussi Family Law in York Region for Succession Planning, Estate Freezes, & Trusts

At Bortolussi Family Law, our divorce lawyers are exceptionally experienced in helping clients to properly plan for their family’s future, as well as managing the complex legal aspects of separation and divorce. Whether you are looking to understand or create a viable and beneficial succession plan for your family business or establish a family trust for the benefit of your family, our lawyers can help.

Our firm has earned a reputation based on decades of experience helping to simplify and clarify the divorce process, even in highly complex situations. From our office in Vaughan, we assist clients from across the Greater Toronto Area, extending out to Mississauga, Brampton, Whitchurch-Stouffville, Woodbridge, Maple, Kleinburg, Caledon, Concord, Vaughan, Bolton, Nobleton, Markham, and Etobicoke and all areas in between. To discuss your circumstances and learn about the options available to you, please reach out to us online or by phone at 416-987-3300.

“My lawyer did an excellent job of clarifying the situation, balancing the emotions and provided positive support and encouragement for the process and the future.” S.F.

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