Beginner’s Guide to Trusts and Trustees

Making a Testamentary Trust or Living Trust

Estate planning can save your family from nasty surprises. By making a personal trust now, you can control how assets are managed while you are alive or after death.    

Financial Planning for Capital Assets or Income

It’s reassuring to know your estate will be faithfully distributed when you die. But imagine if you could also increase estate income and see your heirs enjoy their inheritance while you are alive. Testamentary trusts and living trusts allow you to do just that. They are financial planning tools for managing capital assets and estate income.

Who Can be a Trustee

Your testamentary or living will executor administers, invests and distributes your capital, income and possessions, for your benefit and your heirs’. Think of them as a property manager. Anyone can be your trustee: a relative, friend or professional like an accountant, lawyer, financial trust administrator or with a living trust, even you. When you appoint a trustee or co-trustees in your will, you rest easy knowing a spouse who needs help managing money or a child with developmental disabilities is being cared for by someone who is financially knowledgeable, objective, reliable, mentally capable and sympathetic. With so much at stake, why leave your estate to chance?

Protect Your Family With a Testamentary Trust

Just as life and mortgage insurance protect your family, a testamentary trust assures you they will be assisted after you’re gone. Your assets are transferred through your personal will to a trust agreement managed by a testamentary trustee (or trustees) you appoint. The trustee is the caretaker for your assets and heirs. Your will stipulates when the assets pass from the trust to heirs (for example, minors under 25) and provides loved ones with a reliable income for life. 

Reduce Probate Costs with a Living Trust

Want to manage your estate while you’re alive? Gifting assets to heirs through a living or “inter vivos” trust ensures your assets are used the way you intended. Your property and possessions are transferred outside your estate directly to a living trust agreement. Since they are not subject to probate, your heirs avoid costly probate expenses and estate fees. No more waiting months or years to settle your estate or paying costly estate executors 

Make an Inter Vivos Trust for a Lifetime of Income 

Because real property passes to your trust during your lifetime, an inter vivos or living trust retains legal title to your assets. You can include land, houses, stocks, bonds, cash or almost anything of value. The upside: you have the oversight you wanted and any capital gains on appreciating property go to your heirs. 

“Settling Up” With Your Heirs

By opening a living trust, you become the estate “settlor” or “grantor”. You can appoint yourself trustee or be a co-trustee and keep control of your assets as long as you want. When you die, the trust can go on or be dissolved, with the assets distributed as stated in your will. You can make your living trust revocable, in case you change your mind, or forever irrevocable. It’s your choice.

Growing Your Estate with an Inter Vivos Trust 

Best of all, an inter vivos trust grows in value as you add more assets. Income generated in a living trust is taxed at the highest marginal rate. Distributing it to heirs who are in a lower tax bracket reduces the taxation rate. Your savvy estate planning makes your assets worth more. 

Your Trust Owns Your Property

With a living trust, you can live in your own home while holding the property title and mortgage in your trust. You can carry on as usual, knowing your assets are being distributed as you planned and your privacy is preserved. (Unlike probate court, where anyone can view your estate records, living trusts are confidential. Your business affairs are between you and your trust administrator only.) 

Transfer a Mortgaged Property to a Living Trust

Here’s the fine print: transferring a mortgaged property to a living trust can trigger a “due-on-sale” clause that makes the mortgage due immediately. Before you act, ask your lender if you can transfer a property title without penalty. As long as your property is deeded, the trust agreement is set up correctly and your lender consents, an Ontario wills and estates lawyer can execute the deal for you.

Donate to Charity

Bonus! A living trust gives you the flexibility to donate to charity and earn tax credits through a charitable remainder trust. You receive the income to enjoy and after you die, the charity receives the capital gains from your remaining estate.

Affordable Legal Services for Personal Trusts 

Axess Law’s Greater Toronto or Ottawa law offices can help you include a testamentary trust in your legal will, update a will or create a living trust. Book an appointment by dialing toll free to 1-877-552-9377 or 647-479-0118 in Toronto or using our online booking form. Notary publics and wills and estates lawyers are available 7 days a week, at times convenient for your schedule. We can meet you in person, by phone or on a video conference call.

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