Do You Know the Important Difference in Your Estate Plan Between Wills and Trusts?

You know that everyone needs a will. But do you need trusts as well? Trusts can be created in your will and are useful for numerous purposes. You don’t have to be super wealthy or a rock star to benefit.

Trusts can be used to benefit:
• Minors
• Spouses
• Disabled beneficiaries
• Creditor-proofing
• Beneficiaries from prior relationships
• Holding specific assets, like a farm, business or real estate

You use trusts to appoint trustees who hold and manage specific assets.

Stand Alone Living Trusts

Living trusts can be set up while you are alive. This is more expensive to set up. You also need to name trustees. The title to assets must be transferred to this trust. When you die, the trust assets are not subject to probate. They are owned by the trust. Once assets are transferred into the trust, the trustees control them.

Testamentary Trusts in Your Will

If you make a testamentary trust in your will, this trust does not start until you die and your will is probated. Trusts can be created in your will and are called testamentary trusts. These trusts are less expensive to create but require legal advice to set up. Testamentary trusts hold and can shield assets/money in trust after you die.

Wills appoint executors to manage and distribute money when someone dies. Until someone dies, executors or testamentary trustees have no power to control your money.

Trustees can hold assets for years until a minor child reaches the age of majority or graduates from school. Your executors can also serve as trustees to invest money in trust. Trusts in your will are subject to complex income tax rules. You should obtain tax advice to create testamentary trusts.

Are Trusts Better Than Wills?

This question may not have simple answers. Your opinion may change based on what your primary goals are.

• Living trust terms, unlike wills, can be private and not public information. A judge can order disclosure, but no one may not get it otherwise.

• Creating living trusts is more expensive than preparing wills with trusts.

• American estate planning uses trusts for tax planning as American estate tax is based on the size of the estate. U.S. trust law is different and used to reduce probate and American estate taxes. Canada has no estate tax on the overall size of your estate on death. It does have income tax laws that are different. Use of living trusts is thus more limited to those in Canada’s top tax brackets.

• Canadian trusts, such as alter ego or joint partner trusts, are also used to avoid probating wills for those at least 65 years of age at the time the trust was created. You can transfer ownership of your assets into such living trusts when you are alive. You will still require a will.

• Wills are public documents that can be contested by disappointed beneficiaries. Trusts require legal and tax advice. Never try to create trusts without professional advice.

Do you have questions about trusts? Do you need help making your will? Find out what’s right for you. Contact me today. I look forward to helping you.

Estate law is all I do.

Ed Olkovich, Certified by the Law Society of Ontario as a Specialist in Estates & Trusts Law