 |
 |
|
|
|
||||
|
|  The
Money Management Newsletter: Taxes
and Estate Matters Is a Trust for you? "Put not your trust in money, but put your money in trust" may have originated with Oliver Wendell Holmes in the 1800s, but his words are still relevant today in relation to estate planning. If you are fortunate, you have someone you can count on to take care of things if you are no longer able to do so yourself- in case of your disability or death. But what if you don't have anyone to rely on?
A formal trust may be what you're looking for, especially if you want to leave a legacy but you're worried the recipient might misuse the inheritance, or you want to protect assets or reduce the income tax you pay. Trusts can be used for a variety of estate planning reasons.
A trust can provide the desired degree of control over assets - while you are alive or after your death. It can also provide an intermediary between you and those you want to benefit or protect, or allow you to transfer ownership of assets out of your hands and over to someone else. You can isolate assets you inherit from creditor or family claims by putting those assets into a trust.
If you set up a trust during your lifetime, it's called a living or intervivos trust. If you put instructions in your will for a trust to be set up upon your death, that trust is called a testamentary trust. The timing is up to you.
How a trust works
Each province has rules about how a trust operates. A trust can hold any asset you have - cottage, family home, investments or cash. You give legal control of the assets to someone else-your trustee (or administrator in Quebec) who will be responsible for making sure that the trust runs the way you want. You can name one or more individuals, or a corporate trustee (administrator), like a trust company or lawyer/notary. Your instructions to your trustee are outlined in the legal document that sets up the trust - the trust deed (constituting document in Quebec). The trust deed states how the assets are to be managed, the payment of income or capital for whomever you name (including yourself) and dictate when and why the trust will be discontinued.
Cost / benefit is a deciding factor
When should you consider using a trust? The legal cost of drawing up the trust document can be too expensive for small amounts. A simple trust document can cost approximately $2,000 to $3,000, so if you are putting a small amount into the trust (less than $100,000), then consider alternative protective products like Registered Education Savings Plans for children, or an informal "in trust" account. If however you want a legal and confidential way to safeguard assets for the use of another generation, or reduce the income tax burden you carry by sharing assets with others, or protect yourself and your assets in case you are disabled, or any number of other reasons trusts are established, the legal or accounting costs will most I ikely be worth it over the longer term.
To find out more on Trusts as an estate planning alternative, check out our Learning Centre - Estate Planning Section, or contact your Fiscal Agents advisor.
Be advised that Fiscal Agents Financial Services Group are not engaged in rendering tax, accounting or legal professional services or advice. The comments in this article are not intended, nor should they be relied upon to replace specific professional advice. Before acting on material contained herein. Readers should seek advice that is appropriate to their personal circumstances from a professional advisor. We gratefully acknowledge the contribution of this article from AIM/Trimark Investment Management Inc.
* * *
Have a question regarding this article? Use our feedback form to send us a note. © , Fiscal Agents Money Management Newsletter
|
|
