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What is a Trust?

A trust is an equitable obligation binding a person (the trustee) to deal with property over which he/she has control (called the trust property) for the benefit of persons (who are called the beneficiaries) of whom he/she may themselves be one and any of whom may enforce the obligation. The person who creates the trust is referred to as the settlor that transfers legal title to the property to the trustee. This transfer of title to the trustee imposes a fiduciary duty on the trustee.

 

Classification of Trusts

1. Testamentary Trusts: a trust or estate that arises upon and in consequence of the death of an individual. It includes a trust created under the terms of a will or by an order of a court pursuant to dependants’ relief legislation.

2. Intervivos Trust: any other trust other than a testamentary trust, set up during the settlor’s lifetime.

 

Uses of Trusts in Estate Planning

As a trust possesses several unique features it is the perfect tool for estate planning. Some of the features are:

  • the separation of legal and beneficial ownership
  • the ability to create successive beneficial interests and thereby control the property over a considerable number of years
  • the flexibility that can be provided by conferring a variety of discretionary powers which may affect the selection of beneficiaries, types and timing of benefits and the investment and management of the trust property.

 

Common uses of trusts in estate planning are:

1. To provide for the maintenance and education of infants without powers of control or management

2. To provide a degree of financial independence for an adult child while postponing the time at which the child will obtain full management and control over the property

3. To provide for the care and maintenance of individuals who are unable, for medical or other reasons, to manage their own affairs

4. To provide for the care and maintenance of a spouse during their lifetime while controlling the disposition of the trust property on the spouse’s death

5. Tax planning objectives such as income splitting capital gains with minor beneficiaries or splitting dividend income from small business corporations to a lower marginal tax rate spouse or child.

 

This publication has been prepared by ScotiaMcLeod, a division of Scotia Capital Inc.(SCI), a member of CIPF. This publication is intended as a general source of information and should not be considered as personal investment, tax or pension advice. We are not tax advisors and we recommend that individuals consult with their professional tax advisor before taking any action based upon the information found in this publication. This publication and all the information, opinions and conclusions contained in it are protected by copyright. This report may not be reproduced in whole or in part, or referred to in any manner whatsoever, nor may the information, opinions, and conclusions contained in it be referred to without in each case the prior express consent. Scotiabank Group refers to The Bank of Nova Scotia and its domestic subsidiaries.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.



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About the Author

Jeff Stathopulos, CIM, CFP, Portfolio Manager

Jeff is an advisor and partner with The Navigation Team at Scotia Wealth Management.

He lives in Kelowna with his wife Tanya, their two university bound daughters and their canine kids.

You can contact Jeff by email at [email protected]

Website:  www.yourlifeyourplan.ca

The Navigation Team

Scotia Wealth Management

This column is for information purposes only. It is recommended that individuals consult with their financial advisor before acting on any information contained in this article. The opinions stated are those of the author and not necessarily those of Scotia Capital Inc. or The Bank of Nova Scotia. ScotiaMcLeod is a division of Scotia Capital Inc., Member Canadian Investor Protection Fund.



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The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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