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TAX DANGER FOR TRUSTS ESTABLISHED MORE THAN 21 YEARS AGO!

CAUTION: IMMINENT TAX DANGER FOR TRUSTS ESTABLISHED MORE THAN 21 YEARS AGO!

The reality is that the craze for this legal structure, the trust. Took off at the turn of the 21st century. Indeed, since the early 2000s. Tax planning and reorganizations that do not involve at least one trust, alter-ego. Or family are rare. However, although under the civil code. Trusts can have a maximum duration of one hundred (100) years. The tax authorities do not grant it (will you be surprised?). The same treatment. Indeed, for the tax authorities. There is a presumed (automatic). Disposal of the assets held by the trust every 21 years from the date of its constitution.

However, some mechanisms and plans make it possible to regulate this “trustee majority” situation: it is sometimes possible to decide to do nothing and allow the taxation of the assets of the trust, if necessary; whereas in other cases, it will be preferable to distribute the assets of the trust to its beneficiaries before the 21st anniversary or to transfer the assets of the trust to the benefit of a recently constituted trust, using a rollover tax (or a combination of attribution and rollover, depending on the tax characteristics of the assets held in the trust approaching 21 years).

Let’s first talk about trusts for oneself, called alter-egos, which generally aim to protect assets from the financial and/or legal hazards of a person… We can quickly think, for example, of a woman business that would operate a fuel oil distribution business through M&A advisory. Disaster happens: his employee, by mistake or worse – voluntarily, causes a spill/contamination of a residence or commercial building (with all that ensues, evacuation, decontamination of foundations/soil/water table…)

His joint-stock company will eventually be prosecuted (and condemned), then ultimately, if the company cannot meet its obligations, its financial backers will turn to the president who personally guaranteed the loans of his company. Fortunately, 5 years before this sad event, while her business was flourishing, our shrewd businesswoman had transferred her luxurious mortgage-free family residence to her trust (alter-ego), even before she came 2 years later to personally guarantee the loans of his avcılar escort society.

Absolutely nothing was done to defraud the rights of the company’s creditors, moreover, in my example, the residence did not appear on our businesswoman’s personal balance sheet when her company contracted its loans. This example clearly shows the usefulness of the alter-ego trust: to prevent financial misfortune or a lawsuit from allowing the seizure of an important and precious asset.

For the benefit of her trust (alter-ego), even before she came 2 years later to personally guarantee her company’s loans.

This example clearly shows the usefulness of the alter-ego trust: to prevent financial misfortune or a lawsuit from allowing the seizure of an important and precious asset. for the benefit of her trust (alter-ego), even before she came 2 years later to personally guarantee her company’s loans. .

This example clearly shows the usefulness of the alter-ego trust. To prevent financial misfortune or a lawsuit from allowing the seizure of an important. And precious asset. since the residence did not appear on. Our businesswoman’s personal balance sheet when her company contracted its loans. This example clearly shows the usefulness of the alter-ego trust. To prevent financial misfortune or a lawsuit from allowing the seizure of an important and precious asset.

Since the residence did not appear on our businesswoman’s personal balance sheet when her company contracted its loans. This example clearly shows the usefulness of the alter-ego trust. To prevent financial misfortune or a lawsuit from allowing the seizure of an important and precious asset.

At the level of family trusts, they are usually used to allow the transfer of a business for the benefit of the next generation, by means of an estate freeze of the shares of a corporation operating a small business with the help of a M&A advisor. In addition to the shares of a SEPE, one can think of the holding of a rental property. The holding of a portfolio of shares or units in a real estate REIT. Generating in the event of presumed disposition a significant capital gain.

One can also think of the usefulness of such a family trust in the context of the sale. Of the shares of a qualifying SEPE. To multiply the capital gain exemption (more than $853,000 tax-free). By the number of beneficiaries of this trust. Although Minister Morneau very nearly put the ax in this breach of the Canadian tax system. As part of his tax reform last year. (But in my opinion, it’s only a postponement…)

Whether it’s an alter-ego trust holding your principal residence. Or a family trust holding either share of a SEPE, a multiplex. Or an interest in a real estate investment fund such as Colmenar (or a combination of these assets). It will be in your best interest to monitor and plan for the achievement of “tax maturity”. Of your trust and to oversee the presumed tax disposition of the assets it holds. I invite you to consult your SME INTER Notaries notary or refer to your tax advisor on this subject.

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