A trust can still provide some relief from provincial surtaxes where the income allocated to the beneficiary out of the trust is at a level below the various thresholds where surtaxes kick in.
Transferring Capital Gains – if you own assets that you expect to appreciate in value in the future, it's possible to transfer those assets to a family trust, with minors as beneficiaries.
Capital gains realized in the future on those assets can be taxed in the hands of the beneficiaries without fear of the kiddie tax or attribution rules. You can contact estate planning attorney in Orange County California for legal guidance.
Splitting interest income – the new kiddie tax doesn't apply to interest income at all. You can lend money to a family trust, charge interest at the government's prescribed rate and avoid all attribution and the kiddie tax. Any income earned on the funds loaned to the trust in excess of the interest charged will be taxed in the beneficiary's hands.
Multiplying exemptions – a family trust is still a great tool to multiply certain exemptions. Two exemptions in particular come to mind: the enhanced capital gains exemption and the principal residence exemption.
Financing an education – the family trust can serve as a flexible education saving tool. The key is to avoid, as much as possible, the kiddie tax and the attribution rules on income in the trust.
This can be done by focusing on capital gains, and by reinvesting second-generation income. In conjunction with an RESP, the family trust can make for tax efficient education savings.
Second-generation income – don't underestimate the power of income on income. Where the kiddie tax might apply to dividends, and certain other income, any subsequent income earned on these amounts won't be taxed.