If a person is fortunate, he or she may accumulate significant assets over the course of a lifetime. Deciding what is to become of those assets after one passes away can be a challenge. Wills are a common way of handing down assets; However, once the will is submitted for the probate, the will and the entire application become a part of public domain. Anyone may obtain from the Court a copy of the will submitted for probate. To protect their privacy, many high earners in Ontario are making trusts a part of their estate planning.
Many successful baby boomers are looking to pass on their assets and even their businesses to their children and grandchildren. Trusts are an excellent way for many people to do just that.
There are two kinds of trust that may be employed: a living (inter-vivos) trust, and a testamentary trust.
An inter-vivos trust is a trust created while the trust creator (settlor) is still alive. Assets placed in an inter-vivos trust are managed by the trustee for the benefit of the beneficiaries and the trust creator, who is still alive and may also be named as a beneficiary of the trust. When the trust creator passes away, the assets are distributed in accordance with the trust agreement. The privacy is protected because there is no need to apply to the Court for probate. There is also no estate administration tax. Hence, the trust allows a person to ensure their heirs get the assets at the time and in the amount of his or her choosing, while protecting the family’s privacy and saving on probate costs.
A testamentary trust is created by the will after the trust creator passes away. Like a living trust, it too can be set up to pay out at specified times in specified amounts. Unlike assets bequeathed in a will to the beneficiaries directly, assets placed in trust coud be protected from creditors of the beneficiaries.
Properly written and administered, a trust can be a versatile part of one’s estate planning. They can be complicated, however, and there are many tax implications to consider. An important and sensitive endeavour such as a trust may be most effective if it’s made with the assistance of a knowledgeable Ontario lawyer.
Source: The Globe and Mail, “Why you may need or want to set up a trust in your estate“, Brenda Bouw, May 18, 2017