Do you need a trust?
An introduction to your options of trusts
(4 min read)
What is a trust?
What comes as a surprise to most people is that a trust is not a legal entity itself, although it is treated as one for tax purposes.
A trust is a word used to describe the relationship created when property is transferred from one person to another to hold for the benefit of the beneficiaries.
Property that can be transferred into a trust includes but is not limited to real estate, investments, bank accounts, vehicles, life insurance policies and valuable collections.
Types of trusts
There are many types of trusts and they all come with their own unique attributes.
Some of the most common trusts are:
- Testamentary trust
- Inter vivos trust
- Alter ego trust
- Joint partner trust
- Insurance trust
- Secret/semi secret trust
When do you create a trust?
A trust can be created by an individual during their lifetime (an inter vivos trust) or at death (a testamentary trust).
Why would you create a trust?
People create trusts for many reasons, including:
- To protect a beneficiary who is a minor
- To protect a beneficiary who does not handle money well
- To protect a beneficiary who receives a disability pension such as Ontario Disability Support Plan (ODSP)
- To provide creditor protection for a beneficiary
- To allow income-splitting and tax savings while retaining control of trust assets
- To eliminate probate fees on the value of assets transferred into it
- Succession planning for a family business
- To allow a second spouse to benefit from the trust during their lifetime while ensuring that any remaining trust assets eventually end up in the hands of the children of a settlor’s prior relationship
If you would like to discuss the benefits of a trust for you and your family, please inquire below:
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