Upcoming Events

Is a Trust a Must?

Is a Trust a Must

Written By: John Klotz
1-28-2008

Many people believe that trusts are only for the very wealthy, but that\’s not the case. All of us make financial commitments during our lifetime that we want to see continued. A trust can provide the control needed to ensure that these commitments to the financial security of others last a very long time. Here are some questions to ask yourself to help decide whether you need a trust:

  • Do you have a beneficiary with special needs or one who is too young to manage an inheritance?
  • Do you want to provide income to someone without forcing him or her to make all the investment decisions?
  • Do you have a cottage or family business?
  • Are you concerned about taxes?

If you\’ve answered yes to any of these questions, a trust could be an important part of your overall financial strategy.
Trusts For Now and For The Future

In most cases, one of the following two types of trusts will meet your needs:

Inter Vivos or �Living� Trust: An inter vivos or �living� trust is established while you are alive. Your specified assets are transferred to a trustee that ensures that the terms of the trust are carried out and that the trust is professionally managed. An inter vivos trust often becomes the foundation of your estate plan.

Testamentary Trust: A testamentary trust is set up under the provisions of your Will and can consolidate your estate plan for your heirs. Upon your death, your specified assets are retained in trust and administered according to the instructions given in your Will.

Both types of trust can help you achieve a number of important estate planning objectives, including:

  • Support for a beneficiary with special needs
  • Providing income for loved ones for life without the burden or responsibility of managing the estate\’s assets
  • Ongoing support to a favourite charity
  • Offering privacy because, unlike a Will, a trust agreement can remain a private document between you and your trustee
  • The education or support of a beneficiary such as a child or grandchild
  • Holding in trust a family member\’s share of your estate until the individual reaches an age you consider appropriate
  • Holding an important asset such as a cottage or family business
  • Income-splitting opportunities

Professional Help is Key

Professional administration is vital to the long-term success of your trust and can include such matters as:

  • Collection, reinvestment, and distribution of income capital
  • The custody and safekeeping of assets
  • Comprehensive reporting to beneficiaries
  • Trust tax preparation and filing
  • Maintenance of personal financial records

A Flexible, Lasting Solution

A trust can be one of the most effective and flexible ways to ensure property is managed according to your directions or to transfer assets to your family or a charitable organization, both during and after your lifetime. And it doesn\’t have to be complicated.

If you think a trust may be right for you, speak with your financial advisor who can then either provide trust services or help put you in touch with a professional trustee to provide you with advice on:

  • The role of a trust within your overall financial plan
  • The structure of your trust agreement
  • A comprehensive, long-term strategy to protect and transfer your trust assets
  • The ongoing management of your trust

While trusts can be useful in many estate-planning situations, they\’re not right for everyone and carry the potential for adverse tax consequences if they are not set up properly. That is why it is important that you enlist the help of your financial advisor as a key member of your advisory team that also includes trustee, legal and tax advice. If you decide to set up a trust for your estate, your financial advisor can help ensure that you get access to professional help you need to get it done right.

This article was compiled by John Klotz., BA, CFP, CLU, CH.F.C, RHU, TEP.� John is Vice President – Financial Services, of LMS Prolink Ltd.��� You can reach John at johnk@lms.ca or (416)-595-7484 ext. 305

  1. Past Comments
    Past CommentsAug 13, 2012

    Here’s more advice: make sure your spouse knows what’s happening. I knew someone in Pasadena about 15 years ago whose house went into foreclosure, and she didn’t tell her husband until the day the authorities came to change the locks on the door. Needless to say, it wrecked the marriage. U-G-L-Y. If she’d kept him informed, he might have been able to rein in his spending (e.g., part ownership of small plane) and avoid the disasters ahead.