This commentary is part of our special report on wealth in Canada.
For many successful Canadian families, wealth today extends well beyond operating businesses and investment portfolios. As families seek to expand their holdings to include luxury items like vacation homes, collector cars and fine art, they also need to manage the related tax and legal considerations. In some cases, this can be a challenge, as evolving tax rules and guidance can cause uncertainty about the proper tax treatment of lifestyle assets. For example, recent changes to Canada’s Select Luxury Tax continue to spark many tax questions related to the importation and ownership of aircrafts and yachts.
Today’s family office plays a central role in helping families manage these and other issues that emerge across other lifestyle holdings. Beyond simply overseeing these valuable assets, family offices coordinate ownership structures, manage tax risk, and develop family governance, including proper succession planning. As tax authorities focus on high-value holdings and family investment structures, addressing tax and ownership issues now can ensure that these important and valuable lifestyle assets can be enjoyed for years to come.
Private aircraft and yachts
Although Canada eliminated the Select Luxury Tax on aircraft and vessels in late 2025, families who plan to buy and operate these assets still face important tax and regulatory considerations.
Importing a yacht or aircraft into Canada can trigger GST/HST obligations. Although temporary importation relief is available in limited circumstances, that relief depends on how the asset is used. The Canada Border Services Agency has increased its focus on foreign-registered vessels that are primarily used in Canada, making proper documentation to support this treatment more important than ever.
When deciding on a yacht’s overall ownership structure, families also need to consider how it will actually be used. Where the vessel is registered—or “flagged”—can affect everything from customs treatment and financing to insurance, crewing requirements and liability.
Also, families who own private aircraft often use them for both business and personal activities, creating challenges with how costs are treated. Operating costs may be deductible where the aircraft is genuinely required for business purposes, but owners must be able to demonstrate that the aircraft is necessary to earn income and that its use is reasonable in the circumstances. However, personal use is generally not deductible and may give rise to shareholder benefit issues where the aircraft is owned by a corporation. To support tax deductibility and minimize shareholder benefit considerations, it’s important to retain detailed flight logs and accurate allocations between business and personal use.
U.S. vacation properties
Canadians who own U.S. vacation properties need to carefully consider how they may be affected by U.S. estate tax. Unlike Canada, the United States imposes estate tax on the fair market value of U.S.-situated assets owned at death, including U.S. real estate held by Canadian residents. Federal estate tax rates can reach 40 per cent, although individuals may qualify for relief under the Canada-U.S. Tax Treaty, depending on the value of their worldwide estate.
Families that own or plan to purchase U.S. property should assess their potential U.S. estate tax exposure, and determine whether treaty relief is available. It’s also worth reviewing existing ownership structures, since many common corporate structures are no longer as effective because of changes to both Canadian and U.S. tax rules.
Beyond estate tax, families with U.S. real estate may also be subject to issues including state probate, state inheritance taxes and FIRPTA (Foreign Investment in Real Property Tax Act) withholding on a sale. There may also be U.S. residency issues where significant time is spent south of the border.
Collector cars
Collector cars have become an increasingly popular alternative investment, but they also fall somewhere between investment assets and personal-use property. Cars purchased primarily as investments generally receive normal capital gains treatment, whereas different rules may apply where the vehicle is considered personal-use property.
Families that hold collector cars through a corporation may also face additional considerations including shareholder benefit, GST/HST and insurance issues, particularly where family members enjoy personal use of the vehicle. As with many luxury assets, families need to ensure that their ownership structure reflects both tax efficiency and practical realities.
Fine art
Many affluent families hold artwork through trusts, corporations or family foundations to provide creditor protection and succession planning benefits. These families need to implement an ownership structure that accounts for practical questions such as who displays the artwork, where it is kept and how it will be passed down to future generations.
Art collections also present valuable philanthropic planning opportunities under Canada’s favourable tax rules. Qualifying donations of certified cultural property may eliminate capital gains tax while generating enhanced charitable donation credits.
Another key consideration is the cross-border movement of artwork. Families who wish to transport fine art need to be aware of customs rules, insurance during transit, provenance requirements and export restrictions. Proper planning is important in this area due to increased anti-money laundering scrutiny.
Succession planning
Because of their emotional significance, luxury assets like family cottages, artwork and collector vehicles frequently can become contentious in succession planning. While parents often hope to leave these assets equally to their children, siblings may have different financial resources and levels of interest in maintaining an asset.
For that reason, many family offices are moving beyond traditional estate planning and encouraging families to discuss governance during the parents’ lifetime. Implementing co-ownership agreements, trusts and family governance policies can help prevent disagreements in the future. In addition, where significant taxes may become payable on death, insurance and other liquidity strategies may be available to help an estate avoid selling a cherished family asset.
Growing regulatory scrutiny
Tax authorities continue to devote more attention to shareholder benefits, asset valuations, trust reporting and foreign reporting obligations. Enhanced trust reporting rules and beneficial ownership transparency requirements have also increased the compliance burden for many private structures. Families should regularly undertake reviews of ownership arrangements and reporting obligations as an essential part of good family office governance.
Final thoughts
When it comes to lifestyle assets, family offices are doing much more than simply managing investments. They are helping families establish clear ownership structures, develop governance policies and plan for the successful transfer of these assets to future generations. With thoughtful planning, valuable family assets can help preserve wealth and work for families over time.
Blaine Cameron is the National Leader for Tax, KPMG Family Office. He is based in Toronto.
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