Five Uses of Trusts
Trusts have many uses. Below are some of the most common ways Canadians utilize trusts while estate planning and some issues trusts can address:
Individuals who have remarried and have children from a previous relationship often use trusts to ensure that both their new spouse and their children are treated fairly in their will. Trusts can be used to ensure that a spouse is taken care of during their lifetime with the remaining assets being distributed to the children upon the spouse’s death.
Gifts to a Minor
A trust can be used to give gifts to minors without allowing them access to a large sum of money all at once. The trustee will distribute an income to the minor until they reach a specified age at which time they may be granted full access to the capital.
Disabled Family Member
Trusts can be set up in a way that ensures that a disabled family member, whether that be a spouse or child, receives an appropriate amount of care and income after you die. This can bring great peace of mind to caregivers who worry about leaving behind a disabled dependent.
Spouses Lacking Money Management Skills
Spouses who lack money management skills, whether that be impulsive spending or simply lack of experience, can benefit from a trust being set up for them that distributes an income. In this situation, the trustee can be charged with managing the money and a spend-thrift spouse won’t be able to use the capital too quickly.
Any assets that go through probate become public record. Trusts can offer privacy to an estate as they are not subject to probate. This can be appealing to individuals who would prefer to keep their beneficiaries private due to potentially problematic estranged family members.
Trusts are a great planning tool for many families. It is important to keep in mind that trust law is very complicated and there are a number of tax and estate implications that need to be considered.