What Are The Various Types Of Trusts Available For Estate Planning Purposes In Alberta?
Trusts are established as a tool for managing your personal or organizational assets and distributing them to the beneficiaries. Regardless of the extent of your wealth, estate planning is an important step to distribute your assets such as your savings, properties, insurance, stocks, shares, bonds, disability benefits, business(es) and other assets. Whether you have a will or not, the transfer occurs through a trust. The tax implications for your assets and the beneficiaries can vary according to the type of trust you have established.
In the absence of a will, asset distribution can be more complex and as such a different type of trust can be used. The concept of a trust is relatively straightforward, however the strategies in a trust can be complex. A trust is created when you assign ownership of your assets to a trustee with instructions on how you would like your assets to be handled and distributed amongst beneficiaries. A trust can be written to take effect at a time when you are alive or upon your death.
Benefits of Setting Up a Trust
There are many benefits of setting up a trust in Alberta. Setting up a trust allows individuals to manage and protect their assets. It allows you to control distributions over a specified amount of time (for example if one of your beneficiaries is a spendthrift), provides privacy of your asset values, tax exemptions and savings, helping charities and more. Additionally, setting up a trust also ensures the avoidance of compulsory succession and can minimize the chances for estate litigation down the road.
Testamentary Trusts and Inter Vivos Trusts
There are two main types of trust in Alberta. The first type is testamentary trust, which is created in your will and takes effect upon your death. The assets tied to a testamentary trust form part of your estate that requires payment of any estate fees or taxes that apply. You can change your will at any time by writing a new will.
The second type of trust is called a living trust or Inter Vivos trust. When you create a living trust, the ownership is immediately transferred to the beneficiaries. You can add more properties to the trust at anytime. Since the ownership transfer takes effect when you are alive, the trust assets do not form part of your estate and are not subject to validation.
A testamentary trust is a trust or estate that is generally created as a result of the death of a person. In the province of Alberta, the terms of the trust are established by the will or by court order based on the estate owned by the deceased. For any reason, if the beneficiaries of the will do not receive their fair share according to the will of the deceased, the testamentary trust may become an Inter Vivos trust.
Inter Vivos Trust
All trusts that are not testamentary are called Inter Vivos trusts. The Government of Canada considers the following to be non-testamentary trusts and each trust serves a different purpose. Inter Vivos trusts are great for tax efficiency such as income splitting, minimizing executor’s fees and probate taxes. These types of trusts are commonly used when placing assets in trust for yourself and placing assets in trust for your family.
- 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
At Verhaeghe Law – our Edmonton wills and estate lawyers can assist you with setting up a trust based on your unique situation.
Speak With An Edmonton Wills and Estates Lawyer To Set Up Your Trust Today
Please contact us for a consultation today by calling 587-410- 2500. We are conveniently located in the Mayfield Business Centre in Edmonton and have offices in Athabasca and Whitecourt, Alberta as well and can assist clients all across Alberta with their trust set up.
*Please note the content of this blog offers a general overview and does not constitute legal advice as every case is unique from one another. We encourage you to seek legal advice from an Edmonton wills and estates lawyer for any answers related to estate matters and trusts.