The tax planned will

The attached article from doctorfinance is one of the best explanations I've read about  how using a trust can save tax. And it's not just about the multi-millionaires; it explains how a trust can help those who have done reasonably well financially during their lives. It's definitely worth a read so click here to check it out.

How a trust can lighten the burden of raising a family

Have you ever wondered whether a family trust is right for you? Most people don't even get that far, as information seems hard to find. Tim Cestnick of the Globe and Mail has written an article you can't miss if you're interested in learning about family trusts. Click  here to read it.

In trusts you can trust to find tax savings

This article in today's Globe and Mail discusses ways of using trusts, both those you set up while you're alive and those you set up in your will. It's an interesting article and gives plenty of examples for using trusts. Click here to read it.

Trust services no longer just for the rich

The link below goes to a story in the Star (newspaper in Toronto) that talks about how trust companies provide estate services and how they are more affordable than people think. You probably know that I work in the trust company arm of Scotiabank so I have first-hand experience with this. I can vouch for pretty much everything that is said in this article. Click on the link below to read the story.

 

TheStar Trust services no longer just for the rich

 

I spend many hours a month doing seminars to tell people what we actually do in a trust company. Here are some examples of the services our customers want and need most often:

 

• acting as executor of a will when there is no suitable family member
• acting as a co-executor with an inexperienced or young executor
• working as an agent for the executor of a will after someone has passed away
• holding and paying out money in trust according to a bequest in a will
• holding and paying out money according to a family trust or royalty trust
• channeling assets into foundations for charitable giving
• acting as executor when family members aren't getting along
• estate planning (wills, powers of attorney, health care directives, family trusts etc)
• pulling together a team of estate planning experts including lawyers, accountants, insurance advisors, financial planners
• acting as trustee for a disabled adult under a court order
• acting as attorney appointed by a power of attorney
• completing tax returns for individuals and estates
• administering custodial accounts for seniors who need a bit of extra help with finances
• holding trust funds and making payouts (i.e. being "the office") for non-profits and charities

 

As you can see, it's a pretty diverse menu of activities, and we're pretty good at tailoring our services to fit what you need. I always tell people that we're approachable and hey, we've heard it all, so feel free to simply call up and ask whether your situation is something we can help with. You don't have to be a Scotiabank customer to call our trust office to chat.

Put Faith in Trusts: Estate Planners

Are trusts just for the wealthy? Absolutely not! This article describes how all of us can benefit from using a trust in our estate planning. If your estate planner suggests using a trust, don't automatically dismiss it as being "too complicated" because they really are simple to set up, and there can be so many financial benefits in the right circumstances. Click here to read the article.

What is a Henson trust?

A Henson trust is a testamentary (i.e. set up by your Will) trust that is used to hold the inheritance of a handicapped person. They are used in a very specific way.

A person who is severely mentally or physically handicapped to the point where he or she cannot earn a living is entitled to provincial or territorial government benefits. These benefits include a monthly sum of money for payment of accommodation and other expenses, as well as access to free or subsidized medical, dental, optical and other services. The handicapped person's family want to ensure that these benefits keep flowing to the handicapped person.

A person who receives these provincial and territorial benefits may be cut off from the benefits if they have a certain amount of assets or income. This rule is put into place to ensure that the benefits are paid to people who really need them. In Alberta, as an example, a person receiving benefits is entitled to own no more than $100,000 in assets, as well as a home and a car before the benefits are clawed back. This is known as an asset test, and the benefits program also has a means test that looks at how much income the handicapped person receives in income. If there is more than a certain amount of income, the government benefit will be reduced dollar for dollar.

This is where estate planning comes into the picture. When the parents of a handicapped person are making Wills, they have to decide how much of their estates they are going to leave to the handicapped child. If they leave too little, they run the risk that the child will not be adequately and comfortably provided for. There is also a risk that the Public Trustee could contest the Will on behalf of the handicapped child to get a greater share of the estate given to the child.

If the parents leave too much to the child, they risk cutting the child off from government benefits. Many parents tell me that the value of the medical, dental and optical benefits is very great and would drain a $100,000 trust long before the child passed away.

The solution hit upon by estate planners is to hold a share of the parents' estate in trust. It could be the whole estate or a share of it. The wording and set-up of the trust are crucial. If you simply take the handicapped child's share of the trust and leave it in a regular testamentary trust for that child and nobody else, with payments going to the child and nobody else, that money has clearly been left to the child and will be deemed as an asset of that child.

A Henson trust is set up differently. The trust is held in the name of the handicapped child as well as other people, usually the child's siblings and possibly nieces and nephews. Payments out of the trust are fully discretionary, meaning that payments are made as the trustee of the trust decides. Payments might be made to the handicapped child, or they might not, but the child has no right to demand any money be paid to him or her. Payments might also be made to the other siblings or nieces or nephews as the trustee decides. Therefore it can't be determined that any or all of the money really belongs to the handicapped child.

Henson trusts are completely legal and above board. They are effective in every province and territory in Canada, except for Alberta.

If you are interested in knowing more about whether a Henson trust would be a good idea for your family, find an experienced estate planning lawyer and talk it over.

Should you set up a trust in your Will?

When talking about estate planning and tax planning, there is always quite a bit of discussion of trusts. Many people assume that because their lives and their assets are pretty simple, there is no need of using a trust. However, there are plenty of every-day situations where a trust could be just the right tool to bring about the outcome they want. The following is a brief list of some of the main reasons people use trusts. You just might see yourself or a family member in one of them

Hold for minors - A child can't inherit until he or she has reached legal age, so a child's inheritance must be held in trust until then. But it's also possible to hold a child's share past the age of majority if you feel that age is too young to handle money.

Protect from children's spouses - A parent who will be leaving quite a bit of money to a young person might want to hold the money in a trust to a certain age, to avoid having the money vest in the young person and be available to an unscrupulous spouse.

Protect from spendthrifts or addicts - Sometimes individuals need help managing their money to make the most of it, due to problems that may or may not be resolved in the future. For example, a child with a drug addiction probably should not be given a large sum of money. The child's parent can help protect the child by setting up a trust that pays the child's rent but not for the habit.

Hold a particular asset - A family asset such as a lake cottage may be held in a trust for a set period of time so that all of the family members can use it. The trust should ideally also hold enough money to pay for taxes, insurance and repairs of the asset.

Control ultimate destination of funds - Putting money in trust for individuals, as opposed to simply giving the money to the same individuals, means that if not all of the funds get used up, you can control where they end up. For example, you could set up a trust leaving money for use by your elderly parents, but if the parents don't use it up, you could direct that any money left over goes back to your estate.

Defer taxes - It might be a smart idea to put certain assets, say the shares of a privately-owned business, into a trust for a spouse so that the capital gains tax that would otherwise arise will not arise until the spouse passes away (or disposes of the shares).

Split income - If a parent is paying significant taxes on financial assets, he or she might want to put some assets into a trust, such as a family trust, so that the tax burden is shared with others in the family, or paid by the trust itself.

Achieve a purpose - Trusts can be set up to fund trusts that are not for an individual person but are intended to meet some purpose. An example would be setting aside some money in your Will for the care of your pets or animals after you pass away.

These are very general descriptions, and of course there are other types of trusts as well, but this list is intended to give you some ideas about how readily trusts can be used to achieve certain estate-planning goals. As a word of caution, please do not try to draft a trust without help from an experienced lawyer, as the wording is absolutely critical.

The truth about family trusts

The Globe and Mail is carrying an article today about family trusts. It's pretty interesting reading if you're looking for basic information about what a family trust can do for you. Click here to read the article. I always read the comments too because sometimes I can pick up quite a bit of extra information that way.