What is a Trust and Do I Need One?
What is a Trust? In Ontario, a Trust is a legal arrangement in which one party, the Settlor, transfers ownership of assets to another party, known as the Trustee. The Trustee holds and manages the assets for the benefit of one or more Beneficiaries, as specified by the Settlor. The terms and conditions of the Trust are outlined in a legal document called a Trust Deed or Trust Agreement.
Trusts in Ontario serve various purposes and can be established during an individual’s lifetime (inter vivos Trust) or through a Will and take effect upon their death (Testamentary Trust). Here are a few common types of Trusts in Ontario:
- Testamentary Trust: This type of trust is established through a person’s Will and takes effect after their death. It allows the Settlor to specify how their assets should be managed and distributed for the benefit of certain Beneficiaries, such as minor children, disabled individuals, or family members with specific needs.
- Living Trust (Inter Vivos Trust): A Living Trust is created during a person’s lifetime and can be revocable or irrevocable. A revocable Living Trust allows the Settlor to maintain control over the assets and change the Trust terms as desired. An irrevocable Living Trust, once established, cannot be altered or revoked without the consent of the Beneficiaries or a court order.
- Family Trust: A Family Trust is often used to hold and manage family assets, such as property or investments, for the benefit of family members. It can help facilitate Estate Planning, asset protection, and tax efficiency strategies.
- Charitable Trust: A Charitable Trust is established to benefit one or more charitable organizations. The Trustee manages the assets placed in the Trust, and the income or principal is used for charitable purposes according to the terms of the Trust.
Trusts offer several benefits, including asset protection, tax planning, probate avoidance, and control over the distribution of assets. However, creating a Trust can be complex, and it is advisable to seek the assistance of an experienced Estate Planning lawyer in Ontario to ensure that the Trust is properly established and aligned with your specific goals and legal requirements.
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This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions.