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Learning Objective # 4 Appraise various types of trusts and estates.

Learn about various trusts, such as living and testamentary trusts, their pros and cons, estate assets, and settling your estate. Understand the importance of estate planning and the role of trusts in asset management.

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Learning Objective # 4 Appraise various types of trusts and estates.

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  1. LO#4 Learning Objective # 4Appraise various types of trusts and estates.

  2. LO#4 What is a Trust? • A trust is a legal arrangement through which a trustee holds your assets for your benefit or that of your beneficiaries • Settlor (grantor) is creator of the trust • All trust assets added together are known as an estate • Benefits of trusts: Reduce estate taxes, avoid probate, free you from managing assets, and provide income for a surviving spouse, ensure property serves a desired purpose after your death

  3. LO#4 Types of Trusts • Living (Inter Vivos) Trust • is created and provides benefits while you are alive • Testamentary Trust • established by the creator’s will that becomes effective on death • Spousal Trust • all income from trust must be paid during spouse’s lifetime • capital cannot be distributed to anyone else during spouse’s lifetime

  4. LO#4 Pros and Cons of a Trust Pros Cons • Renders need to probate redundant • More private • Easier to change terms • Trustee has authority to manage assets in event you become disabled • Must be properly funded • Cost of an attorney to set up trust is higher than a will • Still need a last will & testament • Longer time allowed for contesting a trust

  5. LO#44 Make an Inventory of Your Estate • Cash, bank accounts, GIC’s, money market funds • Stocks, bonds and mutual funds • Life insurance, employee benefits and annuities • Your home and any other real estate • Business and farm interests • Corporate interests, partnerships • Interests and trusts • Antiques, art, collections, cars

  6. LO#4 Estate Assets not Distributed by A Will • Life insurance, annuities and RRSP’s go directly to the named beneficiary • Assets held in joint tenancy • confers rights of survivorship • Life insurance and employee benefits • free of income tax • excluded from probate • Lifetime gifts and trusts

  7. LO#4 Settling Your Estate • If you have a will the executor will carry out your wishes • Probate and Administrative Costs • fees for attorneys, accountants, appraisers, executors and administrators (3-5%) • probate costs rise with size of estate • If you die intestate your estate is distributed according to provincial law • Under control of court-appointed administrator

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