Trusts

How BC law treats it

Trust creation is governed by common law. A valid express trust needs the three certainties: a clear intention to create a trust, identifiable property, and identifiable beneficiaries or objects. The settlor must also vest the property in the trustee. The Trustee Act, RSBC 1996, c 464 does not create trusts; it governs trustee powers, the prudent investor standard for investments, and the court's power to appoint, remove or replace trustees. Common business structures include discretionary family trusts that hold shares of an operating or holding company, often after an estate freeze, and bare trusts in which a nominee holds legal title to land or shares for the true owner. Courts also impose trusts without a document: a resulting trust can arise when property is transferred without consideration (Pecore v Pecore), and a constructive trust can be ordered as a remedy for unjust enrichment or wrongful conduct (Kerr v Baranow). Tax rules are federal. Under the Income Tax Act, most trusts are deemed to dispose of their capital property every 21 years, and the tax on split income rules limit income splitting with family members through trusts. Trust reporting obligations have expanded, and the requirements for bare trusts have changed several times: amendments enacted in March 2026 relieved bare trusts from filing for the 2024 and 2025 tax years, but certain bare trusts must file a T3 return and Schedule 15 for the 2026 tax year, due March 31, 2027. In BC, a trust that holds an interest in land must disclose its beneficial owners under the Land Owner Transparency Act. The Fraudulent Conveyance Act allows creditors to challenge transfers into a trust made to defeat them.

What it means for your business

Trusts let business owners freeze the value of a company, bring family members in as beneficiaries, multiply access to the lifetime capital gains exemption in the right circumstances, and hold real estate privately through nominees. They also bring 21 year planning deadlines, annual filing obligations, transparency reporting and tax traps. A trust that is poorly documented or not properly constituted may fail to deliver the intended result. Example: The founder of a Vancouver manufacturing company completes an estate freeze, taking fixed value preferred shares while a new family trust subscribes for common shares. Future growth accrues to the trust for the founder's children, and the trustees must plan for the trust's 21 year deemed disposition date.

Risks and common mistakes

Signing a trust deed but never transferring the settled property to the trustees, so the trust is not constituted. Missing the 21 year deemed disposition date on a family trust that holds appreciated shares. Assuming a bare trust has no filing obligation without checking the CRA's current position for the tax year. Forgetting Land Owner Transparency Act reporting when a trustee or nominee holds BC land. Treating the Trustee Act as the source of the rules for creating a trust.