How is a discretionary family trust used to pass a private business to the next generation in Ontario?

A discretionary family trust is commonly used to hold shares of a private family business so that a trustee, rather than each child directly, controls how and when value in the business flows to different family members. The trust typically holds growth shares created through an estate freeze, where the parents exchange their common shares for fixed-value preferred shares and new growth shares are issued to the trust, and the trustee has discretion to allocate income or capital among the family members named as beneficiaries.

This structure lets parents keep control of the business through their preferred shares and a trustee role while future growth accrues to the next generation, and it offers flexibility to decide later, based on which children actually get involved in the business, how value is eventually distributed. It's also used to build in some creditor protection and income-splitting flexibility, though the tax rules around splitting income with family members are detailed and change over time, so the tax side of this planning should be worked through with an accountant alongside the legal structuring. A family trust used this way needs careful, ongoing administration — it isn't a document you sign once and forget.