Adapting to the New Trust Reporting Regulations: A Strategic Guide for High Net Worth Families with Family Owned Enterprises

For high-net-worth individuals and families running family-owned enterprises, managing wealth and legacy involves not just strategic business decisions but also astute compliance with evolving tax regulations. The recent changes in Canada’s trust reporting rules necessitate a proactive approach to ensure that your family trusts align with these new regulations. In this blog, I aim to guide you through these changes and their implications for your family’s wealth and business.

1. New Filing Requirements for Trusts: The landscape of trust reporting has shifted significantly. Trusts, including those tied to family-owned businesses and personal wealth management, might now be obligated to file tax returns even if they haven’t in the past. This includes:

• Bare trusts, often used in real estate holdings or family enterprise structures.
• Trusts with significant property but no income, like those used in estate freezes or holding personal use property.

Action Steps for High Net Worth Families:

• Review all family and business-related trusts for new filing obligations.
• Assess the structure of your family enterprises to identify any trusts that might now fall under the filing requirements.

2. Comprehensive Reporting of Parties Involved: Transparency is key under the new rules. It is now essential to report detailed information about all individuals involved with the trust, including:

• Beneficiaries with direct or contingent interests.
• Settlors, including those indirectly contributing to the trust through property transfers.
• Accurate and up-to-date personal details of all related parties.

3. Rigorous Information Management: With the introduction of Schedule 15, meticulous record-keeping becomes more crucial. Trusts must now provide comprehensive information about all related parties, and any changes therein, post the initial filing. This requires a robust system to manage and update these details accurately.
4. Managing the $50,000 Exemption Cautiously: For trusts with property valued under $50,000, understanding and managing this exemption is vital. A single instance of exceeding this value can lead to loss of exemption, a situation that could be particularly critical for trusts associated with family businesses and large estates.
5. Tailored Assistance from Our Team: Navigating these complex changes requires not just understanding the regulations but also applying them in the context of your unique family and business structure. Our team is here to:

• Provide bespoke advice tailored to your family’s wealth and business structure.
• Assist in reassessing and restructuring trusts if necessary, to ensure compliance and tax efficiency.

Client Questionnaire for Enhanced Service: To help us serve you better, please consider the following:

1. Trust Identification:

• Have your family or business trusts been reviewed for the new filing requirements?
• Are there bare trusts or other specific arrangements within your family enterprise that need attention?

2. Compliance with Reporting of Parties:

• Is there a comprehensive list of all parties involved in your trusts, including beneficiaries and settlors?
• Do you have a system in place for maintaining their detailed information?

3. $50,000 Exception Consideration:

• Are you aware of the value of the properties held within your trusts and the implications of the $50,000 threshold?

Conclusion: As a CPA and TEP specializing in high-net-worth family enterprises, I understand the intricacies of managing wealth across generations. The new trust reporting regulations bring both challenges and opportunities for strategic planning. My commitment is to guide you through these changes, ensuring your family’s legacy and business continue to thrive under the new compliance landscape.

This information is for discussion purposes only and should not be considered professional advice. There is no guarantee or warrant of information on this site and it should be noted that rules and laws change regularly. You should consult a professional before considering implementing or taking any action based on information on this site. Call our team for a consultation before taking any action. ©2024 Shajani CPA.

Shajani CPA is a CPA Calgary, Edmonton and Red Deer firm and provides Accountant, Bookkeeping, Tax Advice and Tax Planning services.