Should I Use a Family Trust to Save Tax on My Business Sale?
Short answer
You can use a family trust to split capital gains and multiply the Lifetime Capital Gains Exemption (LCGE) on the sale of an active business—but only if you're willing to give up full ownership, involve your kids, and possibly pay them directly. If you're expecting to keep control and keep all the money, a trust won’t work the way you think.
Long answer
Family trusts are pitched as a clever tax move. You transfer your company shares into a trust and when the business is eventually sold, the trust allocates the capital gain across the beneficiaries—usually your spouse and kids—so each one can claim their Lifetime Capital Gains Exemption. That lowers the overall tax bill on the sale, sometimes by hundreds of thousands of dollars.
But what most people don’t realize is that once the shares are in the trust, they’re no longer yours. The trust owns them, and you don’t get to use your kids’ exemptions without giving them something real in return. That means giving up control and sharing the proceeds, either now or later.
I’ve worked with clients who only found this out at the worst possible time: when they were trying to sell, or when their adult children discovered their LCGE had already been used up by their parents decades earlier. One client built his own business from the ground up, ready to sell, only to find out his LCGE had been used decades earlier by his dad’s trust. No one told him. He got no benefit. And now he was staring down a six-figure tax bill for something he didn’t even know had been taken from him.
If you’re about to use your child’s exemption and keep the money, understand what you’re really doing. You’re not just saving tax. You’re spending something of theirs that they can never get back.
I don’t draft family trusts. I don’t unwind them either. But if you’re considering one—or already in one and want to know what it actually means—I offer flat-fee Clarity consult sesions. No upsell. No fluff. Just a hard look at whether this holds up in real life.
This content is for general information only and does not constitute legal advice. Please consult a lawyer about your specific situation.