If you are looking to pass on assets to beneficiaries, setting up estate trust funds may be an effective solution.
Trust funds can help you maintain some control over how and when your assets are distributed, as well as helping to minimize taxes for heirs and bypass probate.
Setting up an estate trust is not particularly difficult, but doing so in a way that ensures that it enacts your wishes and achieves your overall estate planning goals can be challenging. Mistakes can be costly.
At Vest Estate Lawyers in Calgary, our lawyers can help you consider your trust fund options and establish your funds so that they reflect your wishes.
What is a trust?
Estate trusts are important estate planning tools that allow another party (the “trustee”) to take ownership of title to property or assets while you are living and hold them for a beneficiary.
They can be of use no matter the size of your estate, though many individuals with large estates favour trusts. Assets held in a trust can include cash, investments, real estate, or life insurance policies.
For families, setting up a trust is particularly beneficial when you want to pass assets to a minor or dependent child. The trustee takes care of the trust until a nominated date (for instance when the child reaches adulthood), at which point it is passed to the beneficiary. You can set up a schedule for the distribution of assets.
The trustee can either hold the funds or actively manage investment decisions within the estate for you. It is, therefore, important not only to select the beneficiary carefully but also to select a trusted and capable individual as a trustee.
Trusts are tax-effective ways to pass on assets and can help keep asset values private while reducing the prospect of estate litigation.
What is a family trust?
A family trust, like all trusts, is a legal entity that holds assets or property on behalf of third-party beneficiaries rather than those assets belonging to the person who transferred them.
Trusts are flexible options that can be established in many ways. The one thing that all family trusts share is that they protect the interests of family members – though the term “family trust” does not have any legal meaning.
What are the different types of trusts?
There are too many different types of trusts to mention here. The trust type you need depends on what you want to achieve with your assets.
Your lawyer can assist if there are special requirements, but most people must first make a basic decision between creating a testamentary trust or living trust.
A testamentary trust
A testamentary trust enables you to pass on assets after you die and is set up in your will. Just as you can change your will at any time, you can change a testamentary trust until you die.
Because the assets are considered part of your estate, they are subject to taxes and estate fees.
A living trust (“inter vivos” trust)
By setting up a living trust, you can transfer assets while you are still alive in a tax-effective way that may also save executor’s fees and probate taxes for beneficiaries.
A living trust can be set up without the need to go to court and the assets in the trust can be changed at any time.
What’s the process for creating a family trust (inter vivos) in Alberta?
- Create the trust agreement with the relevant clauses
- Bring the trust into legal existence with an irrevocable donation of property – often a gold or silver bar
- Register the donation
- Open a bank account in the trust’s name
- Transfer assets into the trust
- Ensure that the trustee performs administrative duties such as annual tax returns and the preparation of financial statements, taking minutes after each decision is made
The family trust experts at Vest Estate Lawyers in Calgary can assist with each step in establishing your trust.
How will your trust fund lawyer assist in Calgary?
Trusts can dispose of assets in different ways and for different purposes. This can be confusing.
For most people, it pays to seek professional advice from someone who understands your estate planning goals.
Once a trust fund lawyer from Vest Estate Lawyers has helped you identify the type of trust you need, we will help you complete the paperwork to set it up as required and to ensure that it is legally valid.
Trust funds should be treated as a part of your overall estate plan and we can use our experience to advise you on how to best protect your interests and those of your loved ones.
How will we help you set up your trust fund?
Because testamentary trusts are part of a will, initiating such a trust fund will require either writing or re-writing a will to cover the terms and conditions of the trust.
It should specify:
- The assets held in the trust
- The beneficiaries
- The trustee(s) and their respective powers
- The duration of the trust
- How the assets will be distributed to beneficiaries
For a living trust, the exact process will depend on the nature of the trust fund. Generally speaking, we will follow these basic steps:
- Drawing up the trust agreement: naming the trustee and beneficiaries, and including relevant terms, conditions, and clauses
- Arranging to open a bank account in the name of the trust with the relevant financial institution(s)
- Co-ordinating the legal transfer of assets to the trust
Can you set up a trust fund without a lawyer in Alberta?
There is no legal requirement to hire a lawyer to set up a trust. Neither is it particularly expensive.
However, such are the complexities of the many options available, the paperwork, record-keeping requirements, and tax implications that few people are equipped to navigate all the hurdles alone.
Having the guidance of an estate planning lawyer experienced in setting up trusts provides the peace of mind that the “i’s have been dotted and the t’s crossed”.
The input of a lawyer who understands your wider estate planning goals will help ensure that the trust is set up in such a way that it does what you need it to do in the long term.
How does an estate trust affect my will in Alberta?
Even if you have living trusts set up for beneficiaries, you still need a will.
Your will should specify anything important that is not covered by your estate trusts, such as instructions regarding guardianship for dependent children.
The transfer of assets from a living trust after you die will not be affected by your will.
Are funds in a trust irrevocable in Alberta?
Your estate trust can be set up as a revocable or irrevocable fund.
Irrevocable trusts cannot be changed because the assets it contains are no longer considered your property. Revocable trusts can be changed at any time.
There are legal, financial, and tax implications to consider with your estate trust lawyer before setting up any fund – revocable or irrevocable.
Most people consider trust funds as a step in their broader estate plan when preparing a will, power of attorney, and so on.
Others who have taken estate planning steps but not received informed advice may never have considered trusts as a way to safeguard or pass on assets.
Either way, an estate planning lawyer at Vest Estate Lawyers in Calgary is ready to listen to your goals and advise you of your options during a confidential one-on-one consultation.