There are many different kinds of Canadian trusts, and they can be beneficial in a variety of ways. Because a trustee has a fiduciary duty to manage the trust properly, it is important for any trustee to understand specifically what kind of trust it is and what it can do. Also, trustees must ask themselves, "What are the goals and needs of the trust creator and the beneficiary?"
To ensure that they fulfill their fiduciary duties, many trustees seek help from professional advisors, such as estate planning lawyers and certified financial planners. Here let's discuss a number of strategies for using trusts in Canada.
Trusts are often used in business succession planning. For example, a business owner can implement an estate freeze to limit the value of his or her estate to the current value, and then transfer separate company shares (and thus their future increase in value) into a family trust. This strategy can tax efficiently place the future value of the business in the hands of the business owner's children.
A trust can also be used to provide for a spouse, a minor child or a loved one with a disability. Because trust assets are not owned by the beneficiary, they may remain protected from creditors. For example, a trust may often protect assets from lawsuits and the consequences of divorce. With a properly set up trust beneficiaries with disabilities can also remain eligible for Ontario Disability Support Plan benefits.
To be effective, a trust must be properly created and administered. The Hagel Lawfirm helps individuals and families set up and administer trusts, as well as deal with government agencies such as the Canada Revenue Agency. If you have questions about trusts or any other estate planning issues, then our trust administration overview may prove helpful.
You may also want to read our previous post, "New tax rules to apply to Canadian trusts."