Estate Law Canada: top ten

Showing posts with label top ten. Show all posts

Saturday, June 9, 2012

Ten reasons you might want a trust in your will

Whether or not a trust in your will would be useful depends only in part on how much money you have to deal with. Trusts in wills (called testamentary trusts) are not only for those with multi-million dollar estates; they can also be very useful for people like you and me. Although many people shy away from the idea of a trust because they believe it must be complicated, in reality it's more simple than you might think.

A trust is created in a will whenever your trustee (usually your executor) holds onto money or property for someone else, i.e. one or more beneficiaries of your estate. The terms of the trust such as when the beneficiaries are paid and how much they are paid are set out in your will, by you.

A trust is put into a will to serve a particular purpose, and in this post I'd like to briefly describe the top ten common purposes:

1. A child inheriting under a parent's will can inherit the entire share on the day they reach the age of majority. A trust can be used to hold that share,or some part of it, until the child is older and more mature.

2. A trust can protect a child who is hopeless with handling money by ensuring that a pre-determined amount is paid to the child on a monthly or yearly basis.

3. A child with a drug addiction can be protected by a trust that pays for basic necessities such as rent, but does not make the whole share available at once.

4. The share of a handicapped child can be managed for the child's lifetime in a way that brings the parents peace of mind, while at the same time doesn't cause the child to lose valuable provincial health benefits.

5. A spouse who is already in a high tax bracket may not want the additional income that would be earned once a share of the estate is received. Setting up a trust for the spouse's share allows the tax to be earned (and paid) by the trust rather than the spouse.

6. In the case of a second marriage, using a trust would allow a person to give a surviving spouse the use of assets (such as the family home) for that spouse's lifetime, after which the assets could go to the children of the first marriage.

7. A trust can be set up to provide for emergency funds for any vulnerable family member - a child, an elderly parent - to be used when and if they are needed, with any remainder going to the family members you specify.

8. A trust provides funds for the taxes, insurance and upkeep on an asset that is used by more than one beneficiary, such as a lake cottage.

9. Funds that are held in a trust are safe from creditors of the beneficiary (except in the case of bankruptcy).

10. If a beneficiary's marriage breaks down, funds held in trust are generally not held to be matrimonial property, and are therefore not lost to the beneficiary's divorce.

As you can see, these are things that affect even those of us with modest estates. If your lawyer is suggesting a trust for your will, keep an open mind to see if it would work for you.

Tuesday, June 7, 2011

Top ten worst estate planning ideas

Posted by Lynne Butler, BA LLB

Yesterday in my seminar with the Alberta Government Civil Lawyers Association, I talked about the top ten bad ideas for estate planning. It really wasn't hard to come up with ten bad ideas. In fact, limiting the list to only ten was the challenge! In the end, I went with the ten that I see most often, and that seem to do the most damage. Here's my list:

Lynne's list of the top ten worst estate planning ideas:

10. A parent makes an adult child a joint owner of the parent's bank account.

9. A parent leaves the title to the family cottage to all of the children equally.

8. Loans between parents and children are not documented.

7. All of the kids are named together on the parent's will, Enduring Power of Attorney and Health Care Directive.

6. Executors are chosen from each "side" of a blended family to work together.

5. A person applies masking tape to the back of every item in the house, and labels it with the name of the person who they want to inherit the item.

4. Taxation is not taken into account.

3. The estate of the first parent who passed away was never wound up.

2. The child sits in on the parent's meeting with the estate planning lawyer.

1. No planning documents of any kind are put into place.

Not sure why any particular item is on the list? Leave a comment here and I'll go into it further, even though I've blogged about many of these already.

After the seminar, a person confided in me that she has done at least two of the things on the list. That happens a lot. That's the reason I do these seminars - to alert people to possible problems before it's too late to change things.