To protect the life you have worked hard to build, it is essential to create a comprehensive estate plan. By doing so, you ensure the preservation of your estate for your chosen beneficiaries and get to personally decide how assets will be distributed.
There are estate planning options that may be useful to consider. For example, a Trust may be set up between two parties with interconnected responsibilities and rights. They are then carried out through the chosen trustee at a determined time.
It is important to get advice about the most effective tax strategies and cost-efficient methods for estate planning. Our experienced family lawyers at Verhaeghe Law may be able to help you navigate through the complexities of estate planning, answer questions about trusts, and build the best plan for you.
Contact us to schedule a consultation and speak to our legal team.
What is a Trust?
A trust is a legal arrangement and estate planning tool that is used to manage your organizational or personal assets and distribute them to selected beneficiaries. With or without a will, the transfer of assets would happen through a trust. Depending on the type of trust you have put in place, the tax implications for your assets may vary.
While the concept of a trust is fairly straightforward, creating a strategic trust may be complex. For example, without a will, asset distribution may be more complicated. In such cases, a different type of trust may be selected.
Created when you assign ownership of your assets to a trustee, trusts leave a set of instructions that detail how you would like assets to be distributed and managed amongst beneficiaries. They may be written to take effect solely upon your death, or at a specific time while you are alive.
Benefits of a Trust
Establishing a trust in Alberta offers numerous advantages. By creating a trust, individuals gain the ability to safeguard and oversee their assets. Plus, this arrangement grants control over the timing of distributions, which can be a useful management strategy. Moreover, trusts may afford you privacy regarding asset values, offer tax exemptions and savings, support charitable causes, and more. Furthermore, initiating a trust may override mandatory succession rules and reduce the potential for future estate disputes and litigation.
Under the Trustee Act, Albertans are able to create and handle trusts in an efficient manner with a lesser need to go to court. With reduced administrative duties for beneficiaries and a clear outline of trustees’ duties, this estate planning can be completed with the help of a family lawyer. Reach out to our experts at Verhaeghe Law who may be able to develop a unique estate plan catered to your specific needs.
Testamentary Trusts
There are two primary trust types in Alberta. The first is known as a testamentary trust, which is established within your will and becomes active upon your passing. Assets associated with a testamentary trust are considered to be part of your estate, therefore the payment of applicable estate fees or taxes may occur. You retain the ability to modify your will by drafting a new one version at any point.
In Alberta, the conditions of a testamentary trust are set by the will or through a court decree. Should the beneficiaries outlined in the will not receive their rightful portion as specified by the deceased, the testamentary trust might transform into an inter vivos trust.
Inter Vivos Trusts
Any trust that is not classified as testamentary falls under the category of an inter vivos trust or a living trust. With a living trust, ownership may shift to the beneficiaries upon creation. Additional properties can be incorporated into the trust at any juncture. As this transfer of ownership occurs while you are alive, the assets within the trust do not constitute part of your estate and are not subject to probate. An Edmonton wills and estate lawyer may be able to help you decide which type of trust is ideal for you.
The Government of Canada recognizes various non-testamentary trusts, each serving specific purposes. They include:
- Alter ego trust
- Communal organization
- Deemed resident trust
- Employee benefit plan
- Employee life and health trust (ELHT)
- Employee trust
- Environment Quality Act trust
- Graduated rate estate (GRE)
- Health and welfare trust (HWT)
- Hepatitis C trust and Indian residential school trust
- Insurance segregated fund trust
- Joint spousal or common-law partner trust
- Lifetime benefit trust
- Master trust
- Mutual fund trust
- Non-profit organization
- Nuclear Fuel Waste Act trust
- Personal trust
- Pooled registered pension plans (PRPP)
- Qualified disability trust (QDT)
- Qualifying environmental trust (QET)
- Real estate investment trust (REIT)
- Registered disability savings plan (RDSP) trust
- Registered education savings plan (RESP) trusts
- Registered retirement income fund (RRIF) trust
- Registered retirement savings plan (RRSP) trust
- Retirement compensation arrangement (RCA)
- Salary deferral arrangement (SDA)
- Specified investment flow-through (SIFT) trust
- Specified trust
- Spousal or common-law partner trust
- Tax-free savings account (TFSA) trust
- Unit trust
Inter vivos trusts offer significant tax advantages, including the ability to income split and the reduction of executor’s fees and probate taxes. Along with lowering estate fees and upon-death taxes, they may also simplify the transfer of wealth between family members.
The Role of the Trustee
A trustee may be responsible for actively handling investment decisions within the estate or simply holding the funds for an allotted time. Therefore, it is just as important to carefully select a capable trustee as well as a beneficiary.
In family situations, a trustee may take care of a trust until a particular date. For example, if the beneficiaries in a testamentary trust are children, the trustee may be responsible for the estate until they reach adulthood. Then, the trust would be passed onto the beneficiaries, which may be completed through a predetermined schedule of distribution.
For most, a trust may be a singular part of a broader estate plan when creating a will. While it is not mandatory to seek legal advice to set up a living or testamentary trust, it is highly recommended to ensure everything is completed in accordance with your preferences and to avoid costly legal errors.
Call Or Email Our Edmonton Wills and Estates Lawyers Today to Schedule a Consultation
No matter the size of your accumulated wealth, estate planning is the key to handling the distribution of your assets like insurance, stocks, savings, properties, shares, bonds, businesses, disability benefits, and more. Depending on your given circumstances, a trust may be a useful mechanism when making your arrangements.
Our Edmonton family lawyers at Verhaeghe Law recognize the potentially stressful nature of estate planning. We aim to address each case with care and diligence and work in unison with our clients to adhere to their particular needs.
Contact our Edmonton wills and estates lawyers to learn more about the benefits of trusts, get answers to other estate planning questions, and discover how we might be able to assist you.
** Please note, this article is intended as a general overview on the subject of estate law, and is not intended to be legal advice. If you are seeking legal advice, please consult with an Edmonton wills and estates lawyer.
