A legal entity that holds assets on behalf of family members. Family trusts are sometimes used for estate planning and certain tax-deferred transfers (for example, qualifying spousal or alter-ego trusts) — but transfers to a trust generally occur at fair market value and trigger a disposition, and trusts face their own rules including a 21-year deemed disposition. Income-splitting is also restricted by the Tax on Split Income (TOSI) rules. Most lenders are reluctant to finance properties held in family trusts. Trust planning has significant legal and tax consequences — retain a trusts/estate lawyer and a CPA before setting one up.
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