When it comes to securing your legacy and managing your estate, a will is an important foundation—but for many families, especially those with significant or complex assets, a trust can offer even greater control, protection, and flexibility.
Whether you’re planning for the next generation, caring fora vulnerable loved one, or looking to reduce taxes and avoid probate delays, understanding how trusts work—and how to set one up correctly—can be one of the most powerful steps in your wealth transfer strategy.
A trust is a legal arrangement that allows you (the settlor)to transfer assets to a separate legal entity—the trust—which is managed by a trustee on behalf of one or more beneficiaries. In many cases, the settlor’s role is limited to establishing the trust by transferring a nominal amount, while the trust itself is later funded by someone else. Once assets are placed in the trust, they are no longer owned by the individual but are governed by the terms of the trust document. This allows you to retain control over how and when the assets are distributed—even after you pass away—according to the instructions you set out.
A trust separates legal ownership (held by the trustee) from beneficial ownership (held by the beneficiary). This separation is what enables a trust to protect assets, provide tax advantages, and ensure long-term financial stewardship.
There are two primary categories of trusts in Canada: inter vivos trusts and testamentary trusts. The type you choose depends on your goals, timing, and circumstances.
1. Inter Vivos Trusts (Living Trusts)
These are created while you're alive and can take effect immediately. Common examples include:
2. Testamentary Trusts
These are established through your will and come into effect after your death. They can:
While changes to Canadian tax law in 2016 limited some benefits of testamentary trusts, they remain useful in many estate planning scenarios.
Trusts are flexible and powerful tools that can serve a wide variety of purposes, including:
1. Protecting Assets
Trusts can shield assets from creditors, marital breakdowns, or beneficiaries who may lack financial experience or responsibility.
A family trust can allow you to pass wealth to your children while protecting those assets from marital breakdowns or poor financial decisions.
2. Reducing Taxes
3. Avoiding Probate
Assets held in a trust bypass probate, reducing delays, legal fees, and public disclosure of your estate.
4. Controlling Wealth Distribution
You can set conditions on when and how assets are distributed—for example, limiting access until a child turns 30, or distributing funds gradually over time.
5. Providing for Special Needs
A properly structured trust can support a loved one with a disability while preserving eligibility for government benefits.
Creating a trust involves several critical steps—and attention to detail is essential to ensure it’s effective and legally sound.
1. Define Your Objectives
What do you want the trust to achieve? Whether it’s protecting family assets, supporting a cause, or minimizing taxes, your goals will guide the structure.
2. Assemble Your Professional Team
Trusts require coordination between legal, financial, and tax professionals. Work with:
“Coordinating your trust with your tax and investment strategies ensures your wishes are achievable and tax-efficient.”
3. Choose the Right Trust Type
Your financial professional can help you determine which type of trust is best based on your family situation, asset types, and planning timeline.
4. Select a Trustee
This is a critical decision. Your trustee must be trustworthy, competent, and impartial. For complex estates, consider naming a professional trustee or corporate fiduciary.
5. Fund the Trust
A trust is only effective once assets are legally transferred into it. This might include real estate, investment accounts, business shares, or other valuables.
6. Review and Maintain the Trust
Life changes—so should your plan. Review your trust regularly to ensure it reflects your current wishes and complies with evolving laws.
Even well-intentioned trusts can go wrong if not handled properly. Here are some issues to watch for:
Improper Structure
Family Disputes and Miscommunication
How to Avoid It:
Work with experienced professionals and communicate clearly with your family. Regular updates, transparent intentions, and documentation of your reasoning can help avoid emotional or legal disputes.
Beyond the numbers, trusts can support your values:
Trusts aren’t only for the ultra-wealthy. They’re for anyone who wants more control over what happens to their assets, greater protection for their family, and a smoother, more private transfer of wealth.
At Matco Financial, we work with families to design thoughtful estate plans that reflect your values and financial goals. If you're ready to explore whether a trust is right for you, we're here to help—from strategy to implementation and ongoing management.
Our team is here to turn knowledge into results. Start building your financial future by speaking with an advisor.
