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Trust companies: A good solution or just costly?

Do you want to know if you should manage your investments personally or use a trust company? When is a trust company an essential, an asset or a costly option?

If your sole objective is to save on taxes, you don't need to create a trust company1 for your investments given the various fees involved in setting up and administering it: preparing annual financial statements, filing income taxes, updating the minutes.

When a shareholder of an operating company becomes shareholder of a trust company

Here are the 2 most common situations in which an individual becomes shareholder of a trust company:

Situation 1

The operating company's shareholding structure is modified so it can be held by one or more trust companies.

Situation 2

The operating company sells all assets used within the business. It then ceases its activities and holds on to the revenue from the sale. In this case, holding cash and investments makes it a trust company. The shareholder then elects to retain the trust or liquidate it.

4 other reasons to opt for a trust company

Creating a trust company is also beneficial to shareholders who want to:

  • limit their liability to their investment since they aren't responsible for the company's debts
  • protect the company's assets from their personal creditors, and vice versa, since these are 2 separate legal entities
  • take advantage of the confidentiality a company provides
  • split income with family members by paying them dividends, while maintaining control and ownership of the investments

Whether you manage your investments yourself or through a trust company, various investment strategies are available to you. Talk to your Desjardins financial planner for tips that work for your personal situation.

  1. We decided to use the term “trust company,” but “investment company” or “holding company” would have been just as good.