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Is it time to put your trust into a trust structure?

December 21st. 2012
A Trust can be a beneficial tool for estate and financial planning purposes.? It can be a flexible tool to provide a mechanism to distribute assets and income to desired beneficiaries in a tax effective manner. A good example of this tool is a dividend distribution to an adult child (18 years of age) ? think of a student enrolled in post-secondary education.? For example, if an Ontario resident individual receives $40,000 of ineligible dividends as a trust distribution, and this dividend represents the individual?s only source of income, then the total personal tax payable on this amount is $700.? This compares favorably to approximately $13,000 in personal income taxes payable by a parent earning salary income of $130,000 per annum and wanting to distribute additional income to assist in funding their child?s post secondary education. A Trust provides control and flexibility.? An Intervivos Trust (a living trust) is an irrevocable arrangement between the Settlor (in this case not a beneficiary) and Trustees.? This arrangement is made by a Trust Deed of Settlement which designates beneficiaries and sets Trustees? powers.? However, the trust can be structured to provide for discretionary distributions to beneficiaries as the Trustees determine.? This discretion can allow for different beneficiaries to receive differing amounts of distributions as them deem appropriate, or simply to retain income by the trust. For estate planning purposes, a Testamentary Trust ?can allow a decedent to choose who will receive assets, in what proportions and when, as well as who will look after the assets for a minor. Generally, creditor protection is also available for beneficiaries of trust assets.? Under certain circumstances, a trust can also provide some asset protection from a marital breakdown if structured properly. A well structured succession plan could also include a Trust that may allow for the multiplication of the capital gains exemption for qualifying dispositions of small business corporation shares. As you can see, there are many potential advantages to utilizing a trust.




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