A will may be sufficient for many Canadian estates, but it does not address every planning concern. Trusts can provide ongoing asset management, establish conditions for distributions, and address particular family or tax circumstances. Because trusts can create legal, tax, and administrative obligations, the benefits should be weighed against the cost and responsibility of establishing and maintaining one.
At Francis Lawyers, we help individuals and families use wills, trusts, and other planning tools to protect assets and provide for beneficiaries. Our lawyers can explain how different trusts operate and whether one may serve a useful purpose within your estate plan. Located in Ottawa, Ontario, we serve clients in Gatineau, Chelsea, Dunrobin, Kinburn, Arnprior, Munster, Kemptville, Ficko, Edward, and Cumberland Ward, as well as the GTA.
Why Consider Trusts for Your Estate Plan?
A trust is a legal relationship in which a settlor transfers property to a trustee, who holds and manages it for one or more beneficiaries according to the terms of the trust. The settlor, trustee, and beneficiary may sometimes include the same person, depending on the type and purpose of the trust.
Trusts can offer benefits beyond an outright distribution under a simple will. They may allow assets to be managed for minor children, beneficiaries with disabilities, or individuals who may not be prepared to manage an inheritance independently. An inter vivos trust takes effect during the settlor’s lifetime, while a testamentary trust is created through a will and begins after death.
Flexibility and Control
A trust can specify when and how beneficiaries receive property. For example, the trustee may be directed to hold and manage an inheritance until a child reaches a certain age or to make distributions for education, housing, or other stated purposes.
A will does not necessarily require an immediate, one-time distribution. It can create a testamentary trust that continues to manage assets after death. The distinction is therefore not simply between a will and a trust; it is between an outright gift under a will and a plan that incorporates ongoing trust administration.
The terms must give the trustee enough authority to respond to changing circumstances while still reflecting the settlor’s intentions. The appropriate balance depends on the beneficiaries, assets, and purpose of the trust.
Addressing Tax Considerations
Trusts can have tax-planning uses, but establishing one does not automatically reduce taxes. Canada does not impose a conventional inheritance or estate tax. However, death may trigger a deemed disposition of capital property, and Ontario may impose Estate Administration Tax when an estate certificate is required.
Trust income, capital gains, and distributions can also produce tax consequences for the trust or its beneficiaries. Many trusts are taxed at the highest marginal rate, subject to limited exceptions, and trusts generally face a deemed disposition of capital property every 21 years unless an exception applies.
Tax advice should therefore be part of the planning process. Depending on the circumstances, creating a trust may provide tax or succession benefits, but it can also create filing obligations, administrative expenses, and future tax liabilities.
Maintaining Greater Privacy
When property passes through an estate that requires probate, the will and related documents may become part of the court record. Property validly transferred to an inter vivos trust may be administered outside the estate and may not appear in the probate application.
Privacy is not absolute, however. Trustees may have reporting, disclosure, recordkeeping, and tax-filing obligations. A testamentary trust created through a probated will also does not keep the will itself private. The degree of privacy depends on the type of trust, how it is administered, and whether the property was properly transferred to it.
Types of Trusts to Consider
The appropriate trust depends on your objectives, family circumstances, assets, and willingness to accept ongoing administration.
Inter vivos trusts are created during the settlor’s lifetime. Depending on their terms, they may support lifetime asset management, succession planning, or incapacity planning. Transferring property into one can trigger tax consequences, so the arrangement should be reviewed before assets are transferred.
Testamentary trusts are established through a will and take effect after death. They are often used to manage inheritances for minor children, provide for a spouse, or distribute assets gradually to other beneficiaries. Because the trust arises under the will, the estate may still require probate.
Henson trusts are fully discretionary trusts commonly used in Ontario estate planning for beneficiaries with disabilities. When properly drafted and administered, a Henson trust may provide financial support without treating the trust property as an asset available to the beneficiary for certain means-tested benefits. Eligibility consequences depend on the trust terms and the applicable benefit program.
Discretionary or protective trusts give trustees authority over the timing and amount of distributions. They may be considered when a beneficiary needs financial oversight or when an outright inheritance could be depleted quickly. Their effectiveness depends on the drafting, trustee decisions, and applicable creditor and family-property laws.
How We Can Help You Take the Next Step
Our lawyers begin by reviewing your family circumstances, assets, existing will, beneficiary designations, and planning objectives. We can then explain whether a trust offers a meaningful advantage over an outright distribution or a simpler estate plan.
If a trust is appropriate, we can advise on the type of trust, trustee selection, distribution terms, and coordination with your will and powers of attorney. We can also identify when tax or accounting advice should be obtained before the plan is completed.
Trusts are not necessary for every estate. In some cases, a carefully drafted will and properly coordinated beneficiary designations may accomplish the intended goals with less expense and administration. Our role is to help you compare the available options and select a structure that fits your circumstances.
Why Choose Francis Lawyers?
At Francis Lawyers, we have provided legal services in Ontario for more than five decades. Our lawyers work with clients to prepare estate plans addressing family needs, property, business interests, tax considerations, and future administration.
From our Ottawa office, we serve clients throughout the Ottawa area, including Gatineau, Chelsea, Dunrobin, Kinburn, Arnprior, Munster, Kemptville, Ficko, Edward, and Cumberland Ward. We also assist clients in Toronto, Brampton, and across the GTA. Contact us to discuss whether a trust should be part of your estate plan.
