Should you have trusts in your estate planning?

Last Updated on August 18, 2023 by Shayna Beeksma

Disclaimer: This article on testamentary trusts is intended for the purposes of providing information only. It is to be used only for the purposes of guidance. This article is not intended to be relied upon as the giving of legal advice and does not purport to be exhaustive.

Estate planning is an important part of financial planning that involves making arrangements for the management and distribution of your assets after you pass away. 

A trust is a legal arrangement that allows you to transfer ownership of your assets to a trustee who manages and distributes them according to your wishes. Trusts can be a useful tool for estate planning, providing several benefits that can help you achieve your goals. (For more information about the types of trusts, check out this article)

In this article, we will outline three reasons why you might consider adding trusts to your estate plan.

Why Consider Testamentary Trusts: When You Want to Keep the Details of Your Estate Private

One of the main advantages of using a trust is to help you maintain privacy. Unlike a will, which becomes a public document when it is filed with the court, a trust can be kept private.

When you transfer ownership of your assets to a trust, those assets are no longer considered part of your estate and are, therefore, not subject to probate. This means that the details of your estate, including the nature and value of your assets and the identities of your beneficiaries, remain confidential.

Privacy can be especially important if you have complex or sensitive family dynamics. For example, you may not be gifting to your children equally. Whatever the reason, you may want to keep the details of your estate plan private to avoid conflicts or misunderstandings. A trust can help you achieve this goal by keeping your wishes confidential.

This is also true if you want the size of your estate to be kept private. By transferring ownership of your assets to a trust, you can avoid the public process of probate, allowing you to keep the size and details of your estate private.

Why Consider Testamentary Trusts: To Care for Children or Dependent Adults

Another reason why you might consider adding trusts to your estate plan is to provide for the care of your children or dependent adults. If you have minor children, for example, you may want to create a trust to provide for their financial needs in the event of your death. A trust can be set up to manage and distribute assets on behalf of your children, ensuring that they are cared for and that their inheritance is protected.

Many parents opt to create a graduated trust for their minor children. This means that the trust is distributed on a graduated schedule as the children reach certain ages. At that point, the trust can be dissolved and the remaining assets given to them outright.

Similarly, if you have a dependent adult in your life, such as a child with special needs or an elderly parent, you may want to create a trust to provide for their ongoing care. A trust can be set up to provide for their living expenses, medical care, and other needs, ensuring that they are well-cared for after you pass away.

Why Consider Testamentary Trusts: To Avoid Probate

Another reason why you might consider adding trusts to your estate plan is to avoid probate. Probate is the legal process that occurs after someone passes away, during which their assets are distributed according to their will or, if they die without a will, according to provincial intestacy laws. Probate can be a lengthy and costly process, as it involves court fees, legal fees, and other expenses.

By setting up a trust, you can transfer ownership of your assets to a trustee, who manages and distributes them according to your wishes. Because the assets are no longer considered part of your estate, they are not subject to probate. This can help your beneficiaries avoid the costs and delays associated with probate, allowing them to receive their inheritance more quickly and efficiently.

Additionally, estate tax is imposed on estates that exceed a certain value. By setting up a trust, you can reduce the size of your estate and help lower your estate taxes. (Of course, you’d want to talk to your accountant or financial planner about how to maximize  the tax savings you can achieve with a trust.)

These are just some of the reasons why you might consider adding trusts to your estate plan. With careful planning, you can use trusts to achieve your goals while ensuring that your beneficiaries are taken care of after you are gone.

Smart estate planning with Beeksma Law

Trusts can be a powerful tool for estate planning, providing several benefits that can help you achieve your goals. If you want to maintain privacy, provide for the care of children or dependent adults, or avoid probate, adding trusts to your estate plan may be a wise choice.

However, it’s important to seek professional advice when setting up a trust. There are many different types of trusts available, each with its own advantages and disadvantages. A qualified estate lawyer can help you navigate the complexities of estate planning and create a plan for your unique needs and circumstances.

At Beeksma Law, our team of experienced lawyers has the knowledge and expertise to create a comprehensive, personalized estate plan.  Contact us today to learn more about how we can help you with your estate planning needs.