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INVESTMENT INSIGHTS FROM OUR EXPERTS

Writer's picturePatricia A. Stewart | CFA

Everything You Need to Know About Using Trusts for Estate Planning

Estate planning is an important part of wealth management but a whopping 70% of Canadians are currently without an estate plan.


When it comes to retirement planning, most people think of wills. In fact, half of Canadians (55%) have a will and, in many cases, it is the most valuable tool for ensuring your wishes are followed through. But for more complex estate planning, a trust can be an important tool.


What Is a Trust?


While a will covers what happens to an estate and assets after death, with a trust, it can go into effect as soon as the paperwork is signed.


A trust is an active wealth management tool where you transfer ownership of assets to a trustee. This can be either an individual or a trust company. The trust outlines how the assets are to be used while you’re alive and can include covering the costs of providing ongoing care and financial support should you become incapacitated. It can also include holding money for beneficiaries like grandchildren until they turn a certain age.


Two popular trusts used in succession and estate planning are testamentary and living trusts.


Testamentary Trust


A testamentary trust is included as part of a will and takes effect after a death. The assets associated with a testamentary trust are considered to be part of the estate and are subject to any estate fees or applicable taxes. A testamentary trust can be changed by simply having a new will made.


Living Trust


With a living trust, also known as an inter vivos trust, assets are passed immediately onto beneficiaries. A living trust can be updated whenever you like. And because the transfer of ownership occurs during your lifetime, the assets are not considered part of the estate and are not subject to probate, which means the assets can be distributed much more quickly. Probate refers to the fees needed to settle an estate after a death and includes reviewing a will, which can take time.




What Are Some of the Benefits of a Trust?


Many personal factors that will determine whether you should establish a testamentary or living trust. Below are some popular reasons to use a trust.


  • Asset protection: If your spouse needs help managing money, a testamentary trust provides a qualified trustee to manage the trust assets.

  • Children from a previous marriage: A trust can provide financial support for your spouse and ensure children from a previous marriage inherit any remaining assets.

  • A spouse or child is disabled: A trust can offer financial support for a loved one with a disability without compromising their government benefits.

  • Leave gifts to a minor: Through a trust, you can leave money to minor beneficiaries (children, grandchildren, nieces, nephews, family friends) which gets paid out when they reach a certain age. More broadly, a trust gives a trustee control over the timing and amount paid out to beneficiaries based on your wishes.


How Can I Establish a Trust and Will?


If you live in the Toronto or Greater Toronto Area and are considering a trust or succession and estate planning services, a certified wealth management professional can help simplify and clarify the process and advise you on the best strategy for your unique wealth management needs and goals.


A private wealth management professional can also help review, modify, and update the trust to ensure it is relevant and accurate.


Sharp Asset Management – Helping You Reach Your Financial Goals


Sharp Asset Management is an asset management firm that is 100% owner-operated. Our retirement planning professionals are not affiliated with any financial institution, securities firm, or mutual fund company, and our investment decisions are unbiased. We also do not earn any commissions or fees on investments we choose on behalf of our clients.


All of our investment counsellors are charter financial analysts, have the highest level of achievement, and have over 10 years of experience managing portfolios. To learn more about how Sharp Asset Management can help you with your retirement planning, contact us today.

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