Trusts / Wills Law in BC Canada
Types of Trusts and their use in Wills & Estate Planning and Wealth-Management Planning
by: Mary Jane Wilson, BA LLB Barrister & Solicitor
BC Wills, Estates, Trusts and Estate Administration
A testamentary trust is established through a Will and comes into effect at death. A testamentary trust is an effective strategy for both preserving wealth and managing it for your beneficiaries.
Through a trust, a Trustee holds title to assets on behalf of one or more beneficiaries. The terms of this type of trust are kept confidential until the death of the individual, at which time, if the Will is probated, it becomes a public document.
Trusts can be set up for a variety of reasons to achieve a broad range of estate planning objectives.
A common testamentary trust is one set up for minor children. In your Will, you may set up a trust where your beneficiaries do not receive their inheritance until a certain age,
for example, one-third (1/3) at twenty-one (21) years old and the balance at twenty-five (25) years old. In this way, your beneficiary receives the money in stages. You can give your Trustee power to pay money between these ages for various reasons, such as health or education.
They can pay income only, or encroach on the capital of the trust.
For a disabled beneficiary, you may want your Trustee to have full discretion to pay as much or as little of the trust funds to the beneficiary as they think is appropriate until the beneficiary dies in order to maximize government benefits.
Spousal trusts are often used in larger estates where the spouse lacks financial experience, is ill, or incapacitated, or when there are children from a previous marriage. These trusts provide income from the estate to the spouse until his or her death, with the estate ultimately passing to the children or grandchildren.
In addition to their estate planning benefits, testamentary trusts can also furnish tax-savings opportunities. Because they are treated as separate taxpayers, testamentary trusts can provide income-splitting possibilities for beneficiaries. Because of the complexity of the many issues involved and the costs associated with the establishment and administration of a trust, professional advice is essential.
Article writer: Mary-Jane Wilson, LLB, barrister & solicitor
Wills, Estates and Trusts lawyer serving Metro Vancouver BC from her Surrey based offices.
In early 2009, Mary Jane Wilson author of the above article became a content contributor to CanadaLegal.info.
Surrey, British Columbia Lawyer, Mary-Jane Wilson is a partner at Wilson Rasmussen LLP, who practices in the areas of real estate, wills and estates.
For more information, go to :
her website at wilsonrasmussen.com.
Mary Jane Wilson, BA LLB
Metro-Vancouver BC Wills Trusts & Estates Law Lawyer
Office in Surrey BC
INTER-VIVOS TRUSTS: TRUSTS THAT OPERATE DURING YOUR LIFETIME
Although your Will is the key document in your estate plan, inter vivos trusts (trusts that operate during your lifetime) can also be used in estate planning.
Trusts are increasing in popularity because they are flexible, confidential and because assets within the trust fall outside of your estate, making them exempt from probate fees and not subject to attack by a spouse, or child, under the Wills Variation Act, a British Columbia statute which provides you must make adequate provision for a spouse and children. While testamentary trusts within your Will come into effect upon death, inter vivos trusts begin to operate while you are alive.
A trust is the relationship between the person who sets it up (the Settlor), the person who manages the trust property (the "Trustee") and the person who benefits from the trust settlement (the Beneficiary). The trust document sets out all the terms and conditions that the Settlor wants included: what assets are to be held, by whom, for how long, and for whose benefit. Inter vivos trusts can be complex and normally there will be certain costs to establish and administer them.
Generally, when you transfer assets to a trust, you are deemed to have disposed of them at fair market value for taxpurposes. As a result, tax on capital gains may be payable on any increase in the assets value at the time of transfer to the trust.
In Canada, there are two types of trusts for those aged 65 and older that allow you to transfer assets to the trust without paying capital gains tax. They are called alter ego trusts and joint partner trusts. Under Canada Revenue Agencys rules, you can transfer assets, including assets that have appreciated in value, to an alter ego trust without triggering a capital gain. The transfer is considered a rollover.
The alter ego trust is created by a single individual. Property may be rolled into the trust on a tax deferred basis. The deemed disposition of the property will occur at death. The Settlor must be entitled to receive all trust income for life, and no one else may use the trust income or capital during the lifetime of the Settlor. A couple (married or same sex) would establish a joint partner trust. There is a similar tax deferral until death on property transferred into the trust, but in this case it will be upon the death of the last survivor. No one other than the couple can receive any income from the trust during their lifetimes.
Transferring assets to an inter vivos trust allows you to:
1. avoid probate fees on the assets transferred to the trust;
2. avoid Wills Variation Act attacks;
3. avoid attacks by creditors.
The first step in setting up an inter vivos trust is to determine your objectives. Because they are so flexible, inter vivos trusts can be an effective way to deal with a wide range of tax and non-tax issues. Once you have determined your objectives, your next step is to seek professional advice.
The above article on inter-vivos trusts is by:
Surrey, British Columbia Lawyer, Mary-Jane Wilson is a partner at Wilson Rasmussen LLP, lawyers & notaries - she practices in the areas of real estate, wills and estates. For more information, go to her firm's website is
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