Tag Archives: Government

Make It Your Business to Open up the Right Way

Canada has a remarkably friendly climate for small business owners – and for good reason. According to experts, around half of all jobs in the country are held by employees of small businesses, and small business accounts for 30 percent of the country’s GDP. But what is the experience like for new business owners trying to join the fray by bringing their own idea, product or service to the market?

The CBN: Your Unofficial Business Partner

Before jumping into the deep end of the pool, stop by the Canada Business Network, a service of the Canadian government designed to help small-business owners succeed. They have a checklist that helps prospective entrepreneurs establish their business plan and prepare them for the regulatory maze through which they are about to pass. It offers market research and help determining how and when to take the plunge.


All businesses in Canada need to be registered. They must have a unique name and be classified as either a corporation, partnership or sole proprietorship. You’ll get an individual business number and – if your business is located in Quebec – a Quebec Enterprise Number.

Acquiring Necessary Permits and Licenses

You may also require special permits and licenses depending on your location, industry and other factors. These permits and licenses can come from any level of government, from the federal government to the local level. Your business may also be required to comply with other obligations and regulations that aren’t covered by your permits.

Expect that if you are in certain industries such as a importing and exporting or the health industry, there will be supplementary regulations. It is up to you to know and follow all environmental rules as well. As the following article points out, if your company is choosing a health insurance plan, make sure you do your research.

Other Considerations

According to CBN News, only enterprises with between 5 and 100 employees are classified as small businesses. 86 percent of exporters are small businesses, and although 85 percent of businesses have websites, only 7 percent sell online. According to government statistics, thousands of businesses enter and exit the Canadian market every year. Only a small percentage of closures are due to bankruptcy.

Canadian business owners are confident in the future. As the economy begins to rebound from the global downturn that started with the 2008 market crashes, business in Canada are flourishing. Small businesses receive generous benefits, tax breaks and other incentives to open businesses – and even to relocate operations from out of the country into Canada.

Andrew Lisa is a freelance business writer. He covers small business management and entrepreneurship.

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Top Countries in the World that Rule in Anti-Corruption Efforts and Tax Transparency

Corruption is a problem that many nations around the world grapple with. Not only can corruption discourage citizens from working hard to contribute to their national economy, it can also cause people to lose faith in their government or even spark protests and revolutions in extreme cases.

The good news is that not all countries are plagued by this problem. There are quite a handful of countries whose governments have done well to tackle the problems of government finance, which is tax income at its core. Below are some of top countries in the world that took the top ten spots in Transparency International’s 2013 Corruption Perception Index.

Details from PWC’s 2013 Tax Transparency and Country-by-Country Reporting provide insights as to tax transparency laws that helped these countries rank well in the survey.

1. Canada

Canada has an advanced legal system and a parliamentary democracy and is actually tied with Australia in the ninth spot. Canada has been given a Bribery Perception Index score of 8.5 out of 10, which is 10.4% higher than the average for all corruption by country reported by Findthedata.org. Only 4% of the respondents surveyed said that they paid a bribe in the last 12 months.

PWC reported that in terms of tax transparency, the Canadian Resource Revenue Transparency Working Group has already issued a draft framework for tax reporting obligations for Canadian companies that operate in the extractive sector.

2. Australia

As one of the closest allies of the US, Australia also has the biggest democratic policies in the world. It also has wide freedom of speech laws. With an 8.5 out of 10 Bribery Perception Index score, the reported bribery in the past 12 months from the survey participants only accounted for 2%.

New legislation to improve tax transparency was given Royal Assent in June 2013. The new rule enhances information sharing between government agencies.

3. Netherlands

Netherlands is one of the oldest parliamentary democracies in the world. In the Transparency International’s survey, 57.1% of the citizens in Netherlands believe that the Dutch government is battling corruption effectively.

Last year, the Dutch government announced measures against shell companies and tax avoidance. The country will revise tax treaties and improve tax transparency according to Action Aid.

4. Switzerland

A country known for its private banking system, Switzerland has a corruption perception index score of 8.6 out of 10, a score that is 14.3% higher than the average for all corruption by country. Ironically, 36.7% of the participants surveyed believed that their government is effective in battling corruption.

Switzerland may have ranked well in Transparency International corruption perception index but the country has failed to meet international standards on tax transparency according to the OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes.

5. Singapore

With a very strict legal code, Singapore has been known for its relentless battle against corruption in the past years. The city-state has a corruption perception index score of 8.7 out of 10, which is higher by 7.8% than the average for all corruption by country. Nine percent of the participants who were surveyed said that they have paid a bribe in the past 12 months.

Singapore’s information practice is in line with international standards for transparency but the OECD recommends that the country update its effectiveness of information exchange network to further improve tax transparency.

6. Norway

Scandinavian country Norway is on Corruption Perceptions Index’s 5th ranking for the least corrupt country in the world. With only 1% of the surveyed residents reporting that they have paid a bribe in the past 12 months, 38.6% also believed that their government has effectively battled corruption.

Tax lists are freely available in Norway which makes the country very transparent in terms of taxes according to PWC.

7. Sweden

Climbing up to the number 4th spot as the least corrupt country and also one of the world’s top tax transparent nations is Sweden, a politically stable country with highly skilled work force. It has an 8.8 out of 10 corruption perception index score.

Tax related documents are easily accessible in Sweden thanks to the strong principle of access to public records that is followed in Sweden.

8. Finland

Another Scandinavian country which ranks high on the list is Finland, at number 3. With a corruption perception index score of 9 out of 10, only 2% of the surveyed citizens reported paying bribes in the past 12 months.

Corporate income tax information for the previous year is made public every November which makes the country very tax transparent.

9. New Zealand

Second on the list of the least corrupt countries in the world is New Zealand. New Zealand scored 9 out of 10, equivalent to being 143.2% better than the average for all corruption by country. The survey also found that 54% of the participants believe that the government was effective in fighting corruption, and only 4% of respondents admitted they have paid bribes in the last 12 months.

The country is considering new rules on publishing the tax affairs of large multinationals to improve tax transparency.

10. Denmark

Topping the list for Corruption Perception Index’s list of least corrupt countries in the world is Denmark, which is seen by most as one of the happiest destinations around the globe. Placing importance on income equality, Denmark’s corruption perception index score is 9 out of 10. Among the surveyed participants, 55.6% believed that their government has effectively combatted corruption, and no one has reported paying bribes to anyone in the last 12 months.

Danish tax authorities disclose a lot of tax information on companies which makes it a very tax transparent country.

Now that we know the top 10 countries that are perceived to be the least corrupt in the world, we can better gauge the performance of our own countries and compare the anti-corruption methods used in our own countries against the ones used by these top-ranking countries. Helping weed out corruption are tax laws that not just improve tax transparency but also help facilitate easier collection of taxes such as by letting citizens pay taxes through credit cards.

Ryan Del Villar is a content writer for Money Hero, Hong Kong’s leading online comparison portal. Ryan is also a freelance writer at Helm Word, an Online Reputation Management company.

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Quebec Government Adjusts Tax Credits for Students

Photo of student protesting in Downtown Montreal - Spring of 2013

Photo of student protesting in Downtown Montreal – Spring of 2013

How smart of them…

Less than two years ago, students from the universities in downtown Montreal were out on the streets in the masses, protesting about how terrible the planned tuition increases were. They were so keen on having the tuition remain unchanged, that on election day, they cast their ballets in favour of the Parti Quebecois. When the PQ took centre stage, they stayed true to their promise and last spring, the tuition increases were called off. Students were happy and thought that everything worked out in their favour, which at the time appeared to be the case. However, the government had one trick up its sleeve and students are now in for some big news as it is being implemented for this years tax season.

The government has decided to compensate for the cancelled tuition increase through a system that is extremely recognized here in Quebec; taxes. They’ve chosen to decrease the student tax credits for tuition by more than half (20% to 8%). This sneaky, yet intelligent move was for the benefit of Quebec universities who have been suffering from insufficient revenues. For many, this may come as a surprise, however, in order for the education system to truly remain competitive and stay afloat, tuition price increases are as inevitable and necessary as are the price increases in food, both caused by inflation. The ripple effect of cost increases can be seen in all industries, organizations and educational institutions.

Though the government had initially chosen to satisfy the student demands, they’ve now found a way to collect through a different approach; giving back less. The capital needed to keep the wheel turning is an inevitable necessity, and as such, it was merely a matter of time before the government re putting less money in our pockets rather than taking out more. The additional funds the government will retain through these cuts will help the university institutions, whom have been experiencing low revenues and s great news for the universities and for future students, as it helps secure s just hope the extra cash goes where it is truly needed and clearly intended to go.

As a student at Concordia University’s John Molson School of Business, I believe that other students should truly grasp the concept of inflation, and the idea that an education is a long-term investment as are RRSPs. Investing the capital now to secure a comfortable lifestyle tomorrow, is something students should come to terms with and embrace. I myself have.

Please share your thoughts on or questions about the matter below…

Anthony-James Pousseur is an accounting student at Concordia’s John Molson School of business.

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Digital Currency

Change is constant and inevitable. Look around you, everything – from a human child to the latest technology – is changing, getting updated and being made to new versions. With this being said, I can definitely say that development happens everywhere in the world. Suddenly, a seamless and continuous improvement of technology is trending.

A mere example of development I am referring to is digital currency. Digital currency – from the words itself conveys a direct meaning that pertains to money using technology. Yes, you read that right. Nowadays, virtual money can be used in the Internet. Strange as it may sound, money does not only come in form of bills and coins. Though, what’s good about this is that it is used very much the same as how one would use traditional money.

Digital currency can be used to purchase and sell goods or services. They are not controlled by governments nor central banks. It can even give one the power to do business anonymously. In addition to this, digital currency can be purchased in exchange for traditional currency. Apart from these, you may also use it to transfer money to anybody. How convenient can this be? I am sure you have a few thoughts running in your head right at this very moment.

If you ever get into thinking that one can escape tax through digital currency – you may have to think twice. Taxes are also applied on digital currency in the same way that it would to real money which one earns at hand. Think about this: Using digital currency to buy clothes online which will then be received by the online seller, and this ‘virtual money’ if I may call it that way – is still considered income for the abovementioned. In this regard, tax will apply on such even before it reaches the process of having to withdraw it from an automatic teller machine or from banking personnel. Having said that, any resulting income or deficits can be considered taxed earnings depending on certain use and/or given scenarios.

Canada Revenue Agency is a good example of having a strict advocacy in implementing tax and reducing the risks of tax evasion. With that already in mind, we know by heart how important it is to report our accurate earnings, especially that we know that certain agencies such as the CRA will not hesitate to file a case against a suspect for non-compliance of truthfully reporting their income – be it from business or employment.

Should you feel the need to know more information about taxes, you can go ahead and discuss it with an expert consultant of Canada Revenue Agency, with your privacy being of the primary attention. You may simply visit their website at http://www.cra-arc.gc.ca/nwsrm/fctshts/2013/m11/fs131105-eng.html and start from there.

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Bitcoin Goes to Washington

On Monday, November 18, the Senate Homeland Security and Government Affairs Committee held its first hearing on the regulation of virtual currencies. Many analysts and pundits were surprised when top U.S. financial regulators had a generally positive view of Bitcoin. If you haven’t read up on or used Bitcoins yet, you may be asking yourself, “What’s Bitcoin?”

Introduced in 2008, Bitcoin is a popular, peer-to-peer digital currency. It has been called a “cryptocurrency” due to the fact that it is decentralized and uses cryptography as a measure against double spending. Though some of Bitcoin’s popularity can be attributed to “dodgy online markets,” Bitcoin is increasingly being used as payment for legitimate products and services, including notable online presences such as OKCupid, Reddit, and WordPress. However, the majority of current Bitcoin usage can be attributed to speculators.

As it stands today, each individual Bitcoin transaction that takes place is recorded in a public ledger, and a network of private computers performs payment processing. Those who operate these computers are rewarded with transaction fees and newly minted Bitcoins. Typically, the transaction fees are lower than transaction fees of traditional credit cards.

A main concern of the Senate Homeland Security and Government Affairs Committee is that of security, with justice department criminal chief Mythili Raman stating that virtual currency systems are legal, but that criminals will always seek to take advantage of new technologies.

This potential for security threats was expected to be covered by three experts from federal law enforcement agencies, but they instead focused mostly on the real benefits for the financial system these new financial networks could have.

Edward Lowery, special agent with the secret service, which is tasked with protecting the integrity of the dollar, even stated that opportunities exist for digital currencies to operate within existing laws and regulations. Existing avenues for money laundering and illegal activity that are opened up by new forms of digital money were still in discussion—as the government has been cracking down on criminal networks that use digital money. But it seems that the government will not stand in the way of Bitcoin development.

In addition to the secret service, Jennifer Shasky Calvery, the director of the Treasury Department’s Financial Crimes Enforcement Network, also testified to the innovation that Bitcoin provides and the benefits it might offer. Calvery also pointed out that the Internal Revenue Service is “actively working” on rules for Bitcoin.

Ernie Allen, president and CEO of the International Centre for Missing & Exploited Children, listed anonymity, lack of central-bank oversight, and the scarcity of laws monitoring digital currency exchanges as main reasons to oppose the adoption of Bitcoin. His testimony focused primarily on Bitcoin’s potential role in furthering the goals of sex traffickers and child pornographers. Allen has a point, as Bitcoin was used within the notorious Silk Road, an online black market dealing mostly in illegal drugs and other illicit activities.

On the other side, Patrick Murck, general counsel for the Bitcoin Foundation Inc., also testified, as well as Jeremy Allaire, chairman and CEO of Circle Internet Financial. Allaire spoke to the technical and innovative side of Bitcoin, arguing that it helps to advance the ease of electronic payments and money transfers, and benefits businesses by lowering costs. He also highlighted the decreasing risk of fraud, an increase in consumer privacy, and the currency’s potential to expand to consumer financial products.

Which agency will regulate Bitcoin will remain undecided until Washington settles upon a definition for the “cryptocurrency.” The overall takeaway was that there’s a willingness among federal authorities to accept Bitcoin as a legitimate payment alternative. The immediate spike in the value of a Bitcoin unit signals that investors are keen to take advantage.

Kristen Gramigna is Chief Marketing Officer for BluePay, a credit card processing firm that makes billing more efficient with automated invoicing. She has more than 15 years experience in the bankcard industry in direct sales, sales management & marketing and also serves on its Board of Directors.


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What is Bitcoin?

Bitcoin has been in the news on a number of occasions recently. A man in Norway found that a small purchase of Bitcoins made some years ago was now worth enough to buy an apartment, not to mention live very comfortably for a very long time – he made a little less than $1million, despite not actually doing anything since buying 5,000 Bitcoins for $27 in 2009.

It is no surprise that such a story has people talking about Bitcoin, as everyone would love the opportunity to make such a windfall. Bitcoin was also the payment method accepted through the now notorious Silk Road drug and paraphernalia website. Silk Road itself closed down after the owner was arrested, although several other sites are still in existence.

What is Bitcoin?

Bitcoin is a digital currency that is not controlled by a bank or any other financial institution. Bitcoins have been set up and work in such a way that they can’t ever fall under such control, too.

Actually buying Bitcoins can be difficult as some transactions can fall under money-laundering legislation and controls within many countries around the world; you could potentially find yourself committing a serious crime without realizing it if you simply wake up one day and say to yourself, “Yeah, I’m going to buy some Bitcoins.”

MTGox is the biggest Bitcoin exchange currently operating online and, like many others, requires users to send money to the exchange direct from their bank so they can participate in transactions. There is no physical definition of Bitcoin; it isn’t a physical currency that has coins or notes stacked up in a vault somewhere around the world. All Bitcoin “looks like” is a list of digital signatures, one for each previous owner of the bitcoin.

How Can I Spend Them?

The number of places where you can spend Bitcoin are increasing, with a number of bars and pubs around London now having the capability to accept such payments. However, in terms of the “real world,” that is about it.

Unsurprisingly, given that it is a digital currency, there are more opportunities to spend your Bitcoins online. Social networking site Reddit and dating site OKCupid are among the places you can spend Bitcoins, while some companies offering online services such as web hosting or design also accept the payment. Among other industries, it is only the e-commerce fashion sector that is really pushing new ground in accepting Bitcoin.

Can I Make a Fortune?

Okay, so this is the question everyone is asking after seeing that someone bought an apartment after spending $27.

Can you make money from Bitcoin? Yes, you can, but you need to have the analytical skills and be as swift and ruthless as a stockbroker and trader. In 2009, when the $27 worth of Bitcoin was purchased, very few people had heard of it. The problem now is that the secret is out, hence the need to be a decent financial trader so you can buy when the value is low and sell when it is high. Again, you won’t be the only one doing this, so your chances of success may well be limited.

Jason is interested in financial news stories from a variety of sectors, and often writes about everything from Bitcoin and its potential to how motor trade insurance is difficult to acquire for under 25’s, for example. Jason lives in London with his wife.

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The Benefits of Joining a Company Pension Plan



money in pots, thanks Wood Ward MarkwellImage from Woodward Markwell

Joining a company pension plan is potentially one of the most financially useful things any of us can do. The sooner you start paying in, the greater the likely returns will be. So while it might seem tempting to delay and have the money to spend now, in reality if you want to provide a comfortable retirement for yourself you need to start as early as possible.

If you have the option of joining a company pension plan then that should be your first choice. This is because your employer will contribute to the pension and your own contributions will be tax-deductible.

These two benefits both in effect give you free additional money – the company’s contribution plus the reduction in tax paid.

You can be assured that all pension plans funds in Canada are held separately from the company, which means they are managed by an independent administrator and cannot be made available for the company to use.

The Aon Hewitt Benefits Administration Survey, published in 2013, showed that over a third of those who responded spend over 20% of their payroll on benefits, demonstrating just how much companies contribute to their pension plans and their employees’ futures.

The Impact of Ageing Populations

Life expectancy is continuing to rise. In Canada a male born in 2011 can now expect to live to nearly 79 years old, while a female could live to 83 according to Human Resourcs & Skills Development Canada. But the fact that people live longer has cost implications too. As people live longer, their pension income needs to cover more years of retirement.

Auto-enrolment, where employers must automatically enrol their workers into a work pension plan (subject to some conditions), is expected to lead to millions more people with pensions globally.

The Aon survey shows that a third of those who replied expect that 10% or less of employees will opt out of auto-enrolment plans, which is good news for governments that are keen to get people saving for their own retirement.

Another significant finding is that 70% of responders say they are offering Flex plans, a rise from 62% in 2012.

However, on the downside, almost half the career-average plans and final-salary plans which are covered in the survey are no longer open to new members or accruals, compared to a third in 2012.

In Canada these are known as defined-benefit pension plans. However, most people will be paying into a defined-contribution pension plan, which comes with more risk for the employee.

The Importance of Saving into a Pension

Whatever plan your employer offers, it is still almost certainly going to be worth joining for the benefits already mentioned. Start saving into it as early as you can. That way your money has more time to grow. For anyone hoping to enjoy 20, 30 or even 40 years or more in retirement and have a good quality of life, every dollar really can count.

Raven is the author of Benefits Lounge, a blog dedicated to human resources, leadership and human resources

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Introducing EcoRenov; Quebec’s New Eco-Friendly Tax Credit

Home owners were you thinking about renovating but thought it was too costly? It’s time for you to rejoice, as you’ll be happy to hear that the Quebec government has introduced a new tax credit that will encourage and support residents with their “green” renovations.

EcoRenov, a temporary refundable tax credit, is for individuals that entrusted their eco-responsible renovations to a qualified contractor, on their principal place of residence or cottage, under a contract entered into after October 7, 2013, and before November 1, 2014.

To qualify for the tax credit, the work must have a positive environmental impact; improve the dwelling’s energy efficiency, and must also meet recognized environmental and energy standards.

Ultimately, the EcoRenov tax credit – whose maximum amount will be $10,000 per qualifying home – will correspond to 20% of the portion of an individual’s eligible expenditures, that exceeds $2,500.

Here’ are some of the expenditures considered eligible by Revenu Quebec:

  • Permit cost required to execute the work (including the cost of studies performed to obtain such permits)
  • Cost of services supplied by the contractor to carry out the work, including (if applicable) the GST and the QST applicable thereto.

Please note the EXCLUDED expenditures for this program:

  • if it is deductible in calculating an individual’s business income or income from property for the year or any other year
  • it is included in the capital cost of a depreciable property
  • it was included for the purposes of calculating expenses or expenditures giving rise to another tax credit

List of recognized eco-friendly renovation work

  • Insulation of the roof, exterior walls, foundations and exposed floors
  • Sealing
  • Installation of doors or windows
  • Heating and/or cooling system
  • Hot water system
  • Ventilation system
  • Water conservation and quality
  • Soil quality

* The list of eligible ÉcoRénov renovations is long, but the work must meet specific criteria. The detailed list will be available in the coming days on the Revenu Québec website.

For more information, see page 3 of Revenu Quebec’s Information Bulletin 2013-10

Good for you, good for your city, good for the planet and good for your wallet!


The Quebec government has recently added a new component to the program Rénoclimat. This program already provides maximum amount of $12,000 to homeowners who make energy efficient upgrades. Now, the program will support up to $1,275 for individuals who replace their heating systems running on fossil fuels, by a system using a renewable energy source. You will find the details of the current Rénoclimat program. Information on that addition to the program should be updated soon.


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Canada’s Mortgage Rule Changes

Before you set about securing a mortgage for the purchase of a home in Canada, one thing that you’re going to want to do is make sure that you’re up to date on the latest governmental rules that oversee such transactions. Though Canada’s mortgage rules are very important in general, a recent poll has shown that a surprisingly large number of citizens were completely unaware that the government recently changed long-standing rules. Even though these changes affect citizens directly, many were unaware that they existed at all.

If you’re looking for the best mortgage rates in Canada, you should always consider checking a site like Kanetix The site is a great way to find rates that you can afford for mortgages in your area and can also be an excellent way to stay up to date on the market in general. You can use the site to track trends, for example, that can help influence future decisions.

Debt Ration Caps

Under the new rule changes that recently went into effect, the Canadian government has capped the maximum debt ratio for particular households on homes that were purchased for less than one million dollars. Additionally, government insurance to mortgages has been limited for homes valued less than the same amount.

Government Mortgage Insurance

Additionally, government insurance to mortgages has been limited for homes valued less than one million dollars. The change means that you will have fewer options to get back on financially stable ground if your mortgage payments fall behind under the new rules and conditions.

Equity Loans

As reported by the Financial Post, recent rule changes dictate that lenders are now only capable of issuing a home equity loan that is equal to 80% of a property’s value. Recent rules governing home equity loans set the maximum cap at 85%.

Maximum Amortization Period

Under previous rules, the maximum amortization period for a home mortgage in Canada was 30 years. With recent changes to those rules, the amortization period is now 25 years. The rule change means that you will have a maximum of five fewer years to repay the mortgage in full under agreement with the lender.

Most of the changes made by the federal government to home mortgage rules have a negative effect on the customer. If a person were completely unaware that the rule changes have gone into effect, for example, they may not necessarily know that they only have a maximum of 25 years to pay back the mortgage in full. These changes will definitely need to be discussed with a financial adviser before you sign for any particular loan. Changes to the maximum amortization period and the cap on maximum debt ratios in particular will dramatically affect the way a person plans to pay back the money on a mortgage for a particular piece of property and can negatively affect the ways in which people manage their long term financial goals. You should always make sure that you are well aware of any rule changes before you begin the process of securing a mortgage.

Donald Ayers is a property investment consultant. His articles mainly appear on property blogs.

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What is a Family Trust?

Like any financial tool, there are pros and cons and, more importantly, the right time and the right way to use family trusts. And, it goes without saying, there is also the wrong time and the wrong way to use family trusts.

A trust is simply a way to transfer assets from one person to another, through an indirect method. For instance, if I wanted to transfer a huge sum of money to you, I could just write you a cheque. Or, I could put it in a trust, and the trust would pay you. The trust would be managed by someone or by a group of people.

“A trust sounds somewhat convoluted. Why not just give me a cheque?”

A good question. And there are several answers. One of them is income splitting. Often parents earn the bulk of the income in a family, whereas children earn nothing at first, and much less than the parents even as they get older.

Using a family trust to split the income ensures that much of the income comes tax-free. Let’s say you have two young children with no income of their own, and the trust pays each of them $10,000 a year. Nobody pays income tax on their first $10,000. So that means there is an extra $20,000 on which you pay no tax. If you were paying tax at the high rate of 46 percent, you have just reduced your taxes by $9200 per year. Sweet.

If you earn sizeable capital gains, the income-splitting deal is even sweeter, as with dividends.

A family trust can be used also to pass money down to adult children or even to grandchildren. Typically this is a way to help support family members in a much lower tax bracket, without having to pay the higher tax. In other words, tax-free charity within the family. Yes, you could just send a check for $10,000, but you would be taxed on that money when you earn it if you don’t do it through a trust.

The other big reason to use a family trust is to side-step the whole will process at the end of your life. Funds put into a trust do not have to be disclosed to anybody other than those people involved with the trust. So you can keep your wealth and how you distribute it under wraps. The money in the trust is also protected from anyone challenging the will.

Often people leave trusts to minor children so as to support them over time rather than leaving a lump sum that might quickly be squandered. In cases where a person remarries, they are often left to children so that the funds are not part of the new matrimonial deal. In other words, a family trust can make sure that inheritance is passed on to children in a useful and effective manner.

Of course, you can put a trust right into a will, if you simply want to pass along your inheritance to your children in stages rather than paying one big cheque.

“Wow. Family trusts sound great. I’m heading out to the corner store to pick up a dozen of them.”

Not so fast. You can’t pick up a family trust for $19.99. There are significant costs in setting one up and there are ongoing legal and accounting fees involved, too. And the trustees – those who administer the funds – will want to be paid something, too. You might be one of the trustees if it is not an end-of-life situation, but you will probably want an independent person, such as a lawyer, to be one of the trustees.

There is also always the risk that you will lose control. It is important not just to think carefully about who the trustees will be, but also what the terms will be. Once you set the terms, the trust is in charge. You can’t change your mind, because the assets are no longer your own. They now belong to the trust under the rules it was established.

There is also the risk that your trust will be declared a fraud. Of course, if you have set it up properly and for legitimate reasons, this risk is pretty small. But if you are trying to stretch the envelope, there are penalties for fraud.

The disadvantages are small for those people who can really make use of a family trust. But if your assets are small and you have no need to protect them somehow or redistribute your wealth, chances are that you will end up paying as much to set them up and administer them as you will benefit from them.

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