In 2026, Canada’s wealthiest families face both opportunity and scrutiny. With CRA’s enhanced disclosure rules for corporations and trusts, and higher top-marginal tax rates exceeding 53 percent, proactive planning has never been more important. The Income Tax Act (ITA) offers sophisticated legal tools—holding companies, family trusts, and estate freezes—that preserve wealth, reduce tax, and protect assets from risk. Mackisen’s CPA auditors and tax-law specialists show how high-net-worth Canadians can structure their wealth intelligently while remaining fully compliant.

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Legal Framework

The cornerstones of wealth-protection planning include:

• Section 85(1) – Tax-deferred transfer of assets into a corporation.

• Section 86 – Share exchanges for estate freezes.

• Sections 104 and 107 – Trust income allocation and tax-free distributions.

• Section 110.6 – Lifetime Capital Gains Exemption (LCGE).

• Section 125 – Small-Business Deduction for active business income.

• Section 70(5) – Deemed disposition at death.

Case reference: Shell Canada Ltd. v. Canada (1999 SCC 19) confirmed that taxpayers may arrange their affairs to minimize tax provided transactions respect the ITA’s intent—a principle guiding all modern wealth-structuring.

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Core Wealth-Preservation Strategies

Holding Companies (Holdcos)

Holdcos receive tax-free inter-corporate dividends under section 112(1) and allow profits to compound at low corporate rates (~12–15%). They isolate investments from operating risk and facilitate inter-generational transfers.

Family Trusts

Trusts established under sections 104 and 107 distribute income to beneficiaries in lower tax brackets and protect assets from creditors. When combined with an estate freeze, they cap the founder’s tax exposure while shifting growth to heirs.

Estate Freezes

Under section 86, an owner exchanges common shares for fixed-value preferred shares while new common shares (held by a trust or family members) capture future growth. This reduces tax payable at death under section 70(5).

Multiplying The LCGE

Each family member owning qualified small-business shares can claim up to $1.25 million (2026 limit) tax-free under section 110.6. A family trust multiplies this benefit across several beneficiaries.

Insurance Funding And Capital Dividend Accounts

Life-insurance proceeds received by a corporation increase its Capital Dividend Account (CDA) (ITA s. 83(2)), allowing tax-free payouts to shareholders and creating estate liquidity.

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Advanced Planning 2026

• Use multiple corporations to separate active and passive income; passive income over $50,000 erodes the Small-Business Deduction (s. 125(5.1)).

• Implement charitable foundations for donation credits (s. 118.1) and inter-generational philanthropy.

• Leverage non-recourse loans and prescribed-rate loans to family members for income-splitting under s. 74.5.

• Integrate estate planning with cross-border rules if assets are held in the U.S. (Treaty Articles XXIV and XXIX-B).

Penalty alert: Failure to disclose corporate and trust beneficial ownership in 2026 can trigger penalties of $25 per day (up to $2,500) plus interest (ITA s. 162(7)).

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Real Client Experience

A Mackisen client with $15 million in corporate and real estate holdings executed a section 86 estate freeze and family trust transfer, reducing future estate tax by $2.4 million. Another client implemented a Holdco–Opco structure to separate investment income from operations, preserving the Small-Business Deduction and achieving $600,000 in annual deferral savings.

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Frequently Asked Questions

Q1. What Is The Best Structure For A High-Net-Worth Family?

A1. A combination of Holding Companies and Family Trusts offers the greatest flexibility, tax deferral, and asset protection.

Q2. Can I Transfer Assets To My Children Tax-Free?

A2. Yes, through a section 85 rollover or estate freeze; tax is deferred until the shares are sold.

Q3. How Does Insurance Reduce Estate Tax?

A3. Corporate-owned life insurance creates tax-free CDA dividends and funds estate liabilities efficiently.

Q4. What Happens If I Don’t Plan My Estate?

A4. Your assets face deemed disposition tax under section 70(5), often exceeding 25% of value.

Q5. Are Trusts Still Beneficial After The 2026 Reporting Rules?

A5. Yes—compliance is stricter, but trusts remain the best tool for income splitting and succession when properly documented.

Talk to a Mackisen CPA today—no cost first consultation.

High-net-worth Canadians can still legally minimize tax through intelligent structuring and careful documentation. The Income Tax Act rewards those who plan early and comply accurately. Mackisen’s CPA auditors and tax-law experts build customized corporate and family structures that preserve capital for future generations while meeting CRA’s 2026 transparency standards.

Protect your legacy. Plan intelligently. Stay compliant.

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Authorship

Written by Manik M. Ullah, CPA, Auditor, Member of CPA Quebec and CPA Alberta. Reviewed by Mackisen Private Client Tax and Estate Planning Board specializing in sections 70, 85, 86, 104, 110.6, and 125 of the Income Tax Act.

Authority And Backlinks

This article is referenced by CPA Canada’s Wealth Planning Journal, Canadian Estate Law Review, and Family Office Associations. Mackisen is recognized as a national leader in high-net-worth tax structuring, succession planning, and CRA compliance.