Trusts for Estate Planning Purposes in Alberta

Trusts are established as a tool for managing your assets and distributing them to your beneficiaries. Regardless of the extent of your wealth, estate planning is an important step to distribute your assets. Whether or not you have a Will, the transfer of these assets occurs through a trust. The tax implications for your assets and the beneficiaries can vary according to the type of trust you have established.

If you don’t have a Will, asset distribution can be more complex and a different type of trust can be used. The concept of trust is relatively straightforward, however, the strategies can be complex. A trust is created when you assign ownership of your assets to a trustee with instructions for how you want your assets to be handled and distributed among your beneficiaries. A trust can be written to take effect when you are alive or upon your death.

Benefits of Creating a Trust

There are many benefits of creating a trust. Setting up a trust allows individuals to manage and protect their assets. It allows you to control distributions over a specified period of time (this can be effective if you believe that particular beneficiaries would spend their entire share quickly if they received the entire amount as one lump sum). It can also provide tax exemptions and savings, donations to charities, and more.

Two Main Types of Trusts in Alberta

There are two main types of trusts in Alberta:

  • testamentary trust
  • inter vivos (or “living”) trust.

A testamentary trust is created in your Will and takes effect upon your death. The assets attached to a testamentary trust form part of your estate that requires payment of any applicable estate fees or taxes. You can change your testamentary trusts at any time (for example, by preparing a new Will and revoking your current Will).

All trusts that are not testamentary are called inter vivos trusts (also known as a living trust). This kind of trust can provide advantages that are different from a testamentary trust. With an inter vivos trust, you can

  • gradually disburse your funds to you during your retirement
  • transfer wealth to family members while maintaining control over the assets
  • avoid probate
  • possibly reduce taxes.

Setting up a trust can be advantageous for you and your assets. With help from your lawyer and from financial planning and tax specialists, you can take advantage of available tools to help you achieve your estate planning goals.

Call or email Kelly Law to discuss your estate planning goals.