Trusts are valuable tools for many Canadians. However, people often overlook them when they are making other estate planning decisions.
If you are looking ahead and making plans for your legacy, a trust could be an essential part of your goals.
Do I need a trust?
Trusts are not necessary or appropriate for every individual. That said, you need not be exceptionally wealthy to benefit from a trust.
Trusts allow you to give money or property to someone else who manages it for beneficiaries. If you have family members or a business, a trust can make it easier for these parties to receive property before or after you pass away.
There are also tax benefits that come with establishing trusts.
Which type of trust should I set up?
There are different types of trusts that serve a variety of specific purposes. The two types of trusts are testamentary and inter vivos. Testamentary trusts take effect when a person passes away; inter vivos trusts are created when a person is alive.
Within these two categories are several trusts that serve a specific purpose. In fact, the Canadian Revenue Agency recognizes more than 40 types of trusts.
Before setting up a trust, consider the following questions:
- Who is the beneficiary?
- Are you putting property or money into the trust?
- Do you want to control the way beneficiaries receive disbursements?
- Do you have a family business?
- Will you benefit from the trust while you are alive?
These and other questions can make finding the trust that accomplishes your financial goals easier. And setting up the right type of trust is crucial in ensuring it serves its intended purpose.
Is creating a trust complicated?
Creating a trust involves paperwork and contributing property, which may not seem particularly complex. However, complications can arise that jeopardize the trust’s validity and effectiveness.
Forgetting to transfer property, selecting the wrong trustees or choosing the wrong type of trust could all be costly mistakes. However, consulting legal or financial professionals can help you avoid these missteps.
These considerations can affect your estate planning strategies and legacy, so it is wise not to overlook them.