December 17, 2017
Trustee Services

Benefits of a Trust

Trusts are used to determine how assets are distributed during one’s lifetime or after passing away. They are a tool used to transfer wealth between generations and to make provisions for a spouse, minor and adult children and non-family members such as long-time employees, companions, friends or charities. At Legacy Private Trust we are here to administer your trusts. Please remember we do not draft Wills, Codicils or Trust Deeds and cannot provide specific advice, but we can direct you to professionals who do and work closely with them to help create the best possible plan for you.

There are many benefits to a trust whether it is established during one’s lifetime or in a Will or Codicil. The following is a list of a few of the ways you can benefit from using a trust:

  • To manage assets for a spouse or child who is unable to do so
  • For tax planning and income splitting
  • To freeze an estate to minimize capital gains and access capital gains exemptions
  • To hold private company shares in trust for succession purposes
  • To protect assets
  • For planned charitable giving
  • To reduce probate taxes
  • To keep an arrangement between a settlor and beneficiary confidential
  • To create a flexible and creative plan
  • To provide for a beneficiary with special needs
  • To provide for a new spouse and children from a previous marriage at the same time

Types of Trusts

Trusts are such flexible tools that naming all of the different variations would be impossible. We have outlined some of the more common types below. Within the limitless scope of trusts there are two main categories of trusts:

  • Inter vivos trusts (living trusts created through a Trust Deed during the settlors lifetime)
  • Testamentary trusts (a trust that is created through a Will or Codicil).

Legacy Private Trust can act in many fiduciary capacities, such as Trustee, co-Trustee, alternate Trustee or Agent for a Trustee, in any of the following situations:

Inter vivos Trust (Living Trust)

These types of trusts are established during someone’s lifetime with instructions given to the Trustee on how the assets will be used for the beneficiaries. These types of trusts can continue after one passes away, but, they are exempt from probate taxes because they are not considered part of one’s estate and are completely confidential because they never become part of the public record like Wills do when they go through the probate process. Other benefits of this type of trust are confidentiality of assets and beneficiaries and protection of your estate assets from creditors. This can be a concern because creditors can sometimes make claims on the assets in your estate that are not in a trust.

Family and Personal Trusts

These types of trusts can be set up for yourself or your family for income splitting, succession planning, to provide for someone with poor financial management skills, to lower probate fees and for other tax planning purposes.

Joint Partner Trusts

These types of trusts are designed to make sure you, your partner and your assets are taken care of should you become incapable. They allow you to determine exactly how you and your spouse will be cared for personally and financially, and how your assets will be managed and administered. When one partner passes away the surviving partner becomes the sole beneficiary of the trust. When the surviving partner passes away other named beneficiaries such as children, charities and foundations become the beneficiaries.

Alter Ego Trusts

Alter ego trusts will provide for you during your lifetime with all the benefits of a personal trust and also allow for you to name secondary beneficiaries of the trust for when you have passed away.

Blind Trusts

These types of trusts are designed for avoiding conflicts of interest and are perfect for politically exposed people, but these trusts could be used in other circumstances. In a blind trust the Trustee is given full discretion over the assets in the trust. The key to this type of trust is that the beneficiary, usually also the settlor, is unaware of the activity or investments made in the trust and therefore avoids any conflict of interest that could arise. These types of trusts can be established for a temporary situation.

Henson Trusts

A Henson trust is a way for you to enhance the financial security of a loved one with a disability.  It allows your loved one to receive a gift worth any amount without also facing a reduction in the benefits he or she receives from a provincial or territorial government program. Financial gifts made outside of a Henson trust can result in a claw back of government benefits. Henson trusts must be fully discretionary trusts.

Settlement Trusts

Sometimes a Trustee is required when there is a settlement resulting from a Class Action or a Personal Injury lawsuit. Legacy Private Trust is fully licensed and regulated to take on such appointments.

Charitable Remainder Trusts

This type of trust is used to support your loved ones for a period of time and to help a charitable organization of your choice. The income beneficiaries benefit from the income generated from the assets in the trust and the chosen charitable organization benefits from the remaining capital once the trust has run its course as dictated by you in your Trust Deed. These types of trusts can also be transferred into a foundation.

Retirement Compensation Arrangements (RCAs)

An RCA is an unregistered retirement plan used to supplement a pension or RRSP. It is funded by one’s employer and is payable on retirement or termination. These arrangements spread out taxable income over a longer period of time so you pay income tax at a lower rate and less tax overall. These are good for people selling their businesses, athletes and other people who will be generating a high-income over a relatively short period of time. An RCA is tax-deductible for the employer.

International Trusts

For those with international legacy building requirements we have correspondent trust companies in a variety of jurisdictions. These correspondents can assist in acting as a Trustee for a variety of international trusts.

Asset Protection Trusts

Asset Protection Trusts are useful for protecting important assets from litigation, bankruptcy or other situations. These types of trusts are especially useful to protect corporate assets, but the planning must be done properly to ensure that certain legal considerations are taken into account. Doctors, lawyers and other professionals often find them useful.

Condominium Insurance Trusts

Condominium corporations are required under the law to hold their insurance in trust. Legacy Private Trust is able to hold such insurance in trust.

Cemetery Trusts

Cemeteries, by law, are required to have Care and Maintenance & Monument trusts. They are also required to have trusts in some cases for proceeds from prepaid services. Legacy Private Trust is able to manage and administer cemetery trust funds.

Funeral Home Trusts

Funeral Homes are required by law in some cases to have trusts for prepaid services.  Legacy Private Trust is able to manage and administer funeral home trust funds.

First Nations Trusts

First Nations or Aboriginal trusts can be used as a way to preserve culture and provide for generations to come by protecting key assets such as settlement income and resource revenue.

Immigration Trusts

  • In-bound Migrant Trusts
    This type of trust is designed for people coming to Canada. It allows you to bring assets into the country tax free for up to five years through the establishment of an In-Bound Migrant Trust.
  • Out-bound Non-resident Trusts
    This type of trust is designed for those who hold assets (usually real estate) in Canada, but wish to sever residential ties. By setting up an Out-Bound Non-Resident Trust you can enjoy the benefits of owning property in Canada without paying the taxes associated with being a Canadian resident. The trust provides you with the flexibility to live in another country without having to pay residential taxes in two jurisdictions.

Testamentary Trusts

These types of trusts are established in a Will and become active when one passes away.

Family and Personal Trusts

These types of trusts can be set up for yourself or your family for income splitting, succession planning, to provide for someone with poor financial management skills, to lower probate taxes and for other tax planning purposes.

Spousal Trusts

This type of trust is established when a partner passes away and provides for the surviving partner. It allows you to determine exactly how you or your partner will be cared for personally and financially, and how your assets will be managed and administered. When the surviving partner passes away other named beneficiaries become entitled to the benefits of the trust.

Henson Trusts

A Henson trust is a way for you to enhance the financial security of a loved one with a disability.  It allows your loved one to receive a gift worth any amount without also facing a reduction in the benefits he or she receives from a provincial or territorial government program. Financial gifts made outside of a Henson trust can result in a claw back of government benefits. Henson trusts must be fully discretionary trusts.

Charitable Remainder Trusts

This type of trust is used to support your loved ones for a period of time and to help a charitable organization of your choice. The income beneficiaries benefit from the income generated from the assets in the trust and the chosen charitable organization benefits from the remaining capital once the trust has run its course as dictated by you in your Will or Trust Deed. These types of trusts can also be transferred into a foundation.

Inter-Generational Trusts

The ultimate legacy can be achieved through the establishment of an Inter-Generational Trust. These types of trusts can work in a number of ways, but the basic tenet is that the trust provides for your growing family for generations to come. The most common type is the per stirpes type where each branch of the family receives an equal share.

How Can Legacy Private Trust Help?

At Legacy Private Trust we can act as a Trustee, co-Trustee, alternate Trustee or as an Agent for a Trustee in all sorts of situations.  Often a Trustee is unable to perform the duties alone due to:

  • Illness
  • A period where business or personal responsibilities are heavy
  • Travels outside of the province for an extended period of time each year
  • Discomfort with the multitude of tax, accounting, trust administration and asset management tasks that are all part of a Trustee’s job
  • The archaic trust accounting rules, so unlike business accounting rules

Whether asked to perform all or most of a Trustee’s functions during the whole or part of the period of the Trusteeship, Legacy Private Trust has the expertise to help.