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1. What did you learn about your topic that surprised you the most?

I learned that you can attach conditions onto your trust where the beneficiary has to reach certain requirements in order to obtain the benefits of the trust.

2. Provide a real-life example of how this topic is relevant or interesting for you.

This topic is relevant to me because my mom had a small trust fund that she was able to access when she was 25. It didn't have much in it but I was always curious behind the whole premise of a trust fund.

3. If you could pass on your knowledge to a family member or friend, what do you think is the most important thing to pass on?

I think the most important thing I could pass on from everything I learned would be to choose someone for your trustee that you fully trust and know will not betray you and your wishes.

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This website differentiates between the different kinds of trusts ranging anywhere from Living or Estate trusts. It also talks about the 4 kinds of trusts within that topic; Alter ego, employee, master, and real estate. Then states the basic rules or how each of those trusts work so you can get a better sense of which would work well for you in your current situation.

I included it because it doesn't only talk about one kind of trust and it is also specific to how trusts work in Canada. This just makes the post more useful for any classmates reading it since we are all residing within Canada as of right now. It was a very basic website so it was easy to understand most terms. I find when you are able to understand something better you become more interested within that topic rather than wondering what it is you are researching.

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A trust is a vehicle for holding and passing on family property. As such, it typically serves at least one of two purposes: It can reduce a family's taxes by shifting income to members in lower tax brackets, and it can provide for less fortunate (or more impulsive) members by controlling how their money is disbursed.

A trust is nothing more than a relationship. It occurs when one person, often called the settlor, gives property to another person, the trustee, to manage on behalf of still other people (the beneficiaries). Using the estate freeze, for instance, owners of a growing company convert their shares of the existing business into preferred stock calibrated to the value of the business and sell new common stock to the family trust that captures the company's future growth.

A trust is not a legal entity that can enter into contracts or incur liability. As such, trusts are not particularly difficult to establish-in fact, technically speaking, most trusts don't even require a founding document. But the tax law surrounding trusts is just as complex as one might expect. An individual interested in setting up a trust ought to talk to a lawyer first.

Because of the dividend tax credit and personal tax credit, for example, a Canadian without any other income-especially a student with deductible education expenses-could receive tens of thousands of dollars in dividends from Canadian companies tax-free. But while the family trust has a well-earned reputation as a tool for the wealthy, these benefits can reach deep into the middle class. For example, a special rule known as an estate freeze can make a trust indispensable for even modestly successful family businesses.

By locking in the current generation's stake at the company's current value, they can prepare for the tax liability when they die without worrying about having to sell the company. Meanwhile, the next generation can share in the company's profits through dividends allocated to the common shares.

There are fundamentally two kinds of trusts. Testamentary trusts are created as part of a will and take effect upon the death of the testator. Recent changes to Canadian law took away the tax advantage of setting up long-term testamentary estate trusts, making them less useful.

Any other trust, including one using an estate freeze, is a living, or inter-vivos, trust, established while its architect is still alive. A living trust can be established for a variety of purposes-the Canada Revenue Agency (CRA) has identified 31 different types of living trusts -for a variety of different beneficiaries.

Special rules allow an individualage 65 or olderto roll over assets into these trusts without having to pay capital gains on the assets first. Only the individual (and the partner, in the case of a joint trust) can benefit from the trust while he or she is alive. When the settlor (or surviving partner) dies, the trust pays tax on realized capital gains, but the property in the trust can be distributed to heirs without being subject to probate fees.

Though a Canadian trust is not a legal entity, it is under Canadian law a taxpayer-at the highest rates. That is why trustees try to pass on any income earned by trust property to beneficiaries, so they can pay the taxes at their own, presumably lower, rates. But in an effort to limit using trusts for tax avoidance, Canadian tax law attributes trust income to the person who transferred the property to the trust if the recipients are close relatives.

In general, these attribution rules apply when the beneficiary is either a spouse or under the age of 18, in the case of dividend and interest income (but not capital gains). The attribution rules do not apply when the beneficiary is an adult child (or grandchild, or niece, or nephew).

Other rules attribute the income to a transferor who can effectively control, or reclaim, the assets in the trust. There are exceptions, including alter-ego trusts and joint-partner trusts. But otherwise, the rules make revocable trusts increasingly common in, for example, the U.S., while difficult to use in Canada.

The attribution rules guide these decisions. Since a transferor can't control the property in a trust, she can't be a sole trustee. Usually, the person who is transferring the property that is to be put into trust asks someone else to be the settlor-a grandparent, perhaps, or close family friend.

There are times, however, when you must appoint someone else, such as a trust company, as a trustee. For example, if you want to establish a trust in another province, the trustee, or the majority if there are multiple, must reside there. Other times to appoint an outside trustee are when you want pure independence or anticipate conflict within the family.

A trust does not exist without some property being transferred, or as it's called, settled-the prospect or promise of making the transfer is not enough to create a trust in advance. Moreover, given the attribution rules, it may be unwise to settle a trust with the actual property that will provide income or capital to the beneficiaries, though the settling property should have some value.

If a trust's beneficiaries would otherwise trigger the attribution rules, the settlor or the individual with the real assets can avoid them by making what's known as a prescribed interest rate loan, a documented loan with an interest rate no lower than the CRA prescribed interest rate.

The trust can then use the proceeds of the loan to purchase the assets it will hold. For example, in the case of an estate freeze, a small loan of, say, $100, ought to be enough for the trust to buy the family company's new common shares at a nominal par value. The trust can repay the loan when it receives the first dividend check.

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Everything You Need to Know About Trust Funds in Canada

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A trust is a vehicle for holding and passing on family property. As such, it typically serves at least one of two purposes: It can reduce a family's taxes by shifting income to members in lower tax brackets, and it can provide for less fortunate (or more impulsive) members by controlling how their money is disbursed.

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This website talks about a multitude of trusts giving you many options to choose from research wise. It also talks about the codes that are used based on what trust you have chosen so it's almost like a short form abbreviation for the full trust name. These codes also relate to taxes for when filing a tax return with your accountant so they are very helpful.

I included this website because it is a Government of Canada link. Which means that all information is constantly updated and valid so you wont have to second guess the information posted here. Also because it gives a list of over 15 kinds of trusts and you can click on each trust and itll take you to another page which will further dive into that topic. I think that this is very helpful for people who are just trying to learn more and further their knowledge about trusts with this helpful and trustworthy link.

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A trust is either:

Each trust has different tax rules.

At the bottom of this page you will find information on public trusts and public investment trusts and the different trust codes.

Trust types

Testamentary trust

A testamentary trust is a trust or estate that is generally created on and as result of the death of the person. The terms of the trust are established by the will or by court order in relation to the deceased individual's estate under provincial or territorial law.

Generally, this type of trust does not include a trust created by a person other than a deceased individual, or a trust created after November 12, 1981, if any property was contributed to it other than by a deceased individual as a consequence of the individual's death. Contact us for rules about testamentary trusts created before November 13, 1981.

If the assets are not distributed to the beneficiaries according to the terms of the will, the testamentary trust may become an inter vivos trust.

For tax years ending after December 20, 2002, a testamentary trust may become an inter vivos trust if the trust incurs a debt or other obligation to pay an amount to, or guaranteed by, a beneficiary or any other person or partnership (any or all referred to as specified party), with whom any beneficiary of the trust does not deal at arm's length.

This does not apply for certain debts or other obligations, including those:

incurred by the trust in satisfaction of a beneficiary's right to enforce payment of an amount payable by the trust to the beneficiary or to receive any part of the trust's capital

owed to the beneficiary as a result of services provided by the beneficiary for the trust

owed to the beneficiary as a result of a payment on behalf of the trust for which property was transferred to the specified party within 12 months of the payment and the beneficiary would have made the payment had they been dealing with the trust at arm's length

Inter vivos trust

An inter vivos trust is a trust that is not a testamentary trust.

The following are different types of inter vivos trusts:

Alter ego trust

This is a trust created after 1999 by a settlor who was 65 years of age or older at the time the trust was created, for which the settlor is entitled to receive all the income that may arise during their lifetime, and is the only person who can receive, or get the use of, any income or capital of the trust during the settlor's lifetime. A trust will not be considered an alter ego trust if it so elects in its return for its first tax year.

Communal organization

We consider a trust to exist when a congregation meets all of the following conditions:

has members who live and work together

follows the practices and beliefs of, and operates according to the principles of, the religious organization of which it is a part

does not permit its members to own property in their own right

requires that its members devote their working lives to the congregation's activities

carries on one or more businesses directly, or owns all of the shares of the capital stock of a corporation (except directors' qualifying shares), or every interest in a trust or other person that carries on the business to support or sustain its members or the members of another congregation

The communal organization has to pay tax as though it were an inter vivos trust. However, it can elect to allocate its income to the beneficiaries. For more information, see Information Circular IC78-5 Communal Organizations.

Deemed resident trust

A trust is deemed resident in Canada where there is one of the following:

a resident contributor

a resident beneficiary under the trust

A resident contributor to a trust at a particular time means a person that is, at that time, resident in Canada and has at or before that time made a contribution to the trust.

A resident beneficiary under a trust at a particular time is a person (other than an exempt person or successor beneficiary) that, at that time is a beneficiary under the trust, is resident in Canada, and there is a connected contributor to the trust.

A connected contributor is a person who made a contribution either in Canada, within 60-months of moving to Canada, or within 60-months of leaving Canada.

For tax years ending after February 11, 2014, individuals who had been resident in Canada for a period of, (or periods the total of which is) 60 months or less were exempted from treatment as resident contributors or connected contributors. This exemption also applies to the tax years of non-resident trusts that end before 2015 if all of the following conditions are met:

no contributions were made to the trust after February 10, 2014 and before 2015

at any time that is after 2013 and before February 11, 2014, the 60 month exemption applied in respect of the trust

These trusts are deemed resident for several purposes including:

filing income tax returns and paying income tax under Part 1 of the Act

withholding tax on amounts paid to non-residents under Part XIII

certain filing obligations relating to ownership of foreign property, money received from a given to foreign entities

The trusts are NOT considered resident for calculating a Canadian's liability when paying the trust (i.e. when a resident taxpayer pays the deemed resident trust it is requires to withhold Part XIII). They are also not considered resident for the purpose a determining a Canadian resident's (other than the trust) foreign reporting requirements.

If you need help determining whether the trust is a deemed resident of Canada, contact us.

Employee benefit plan

Generally, this is any arrangement under which an employer makes contributions to a custodian, and under which one or more payments will be made to, or for the benefit of, employees, former employees, or persons related to them.

For more information, and for details on what we consider to be an employee benefit plan and how it is taxed, see archived Interpretation Bulletin IT502 - Employee Benefit Plans and Employee Trusts and its Special Release.

Because the allocations are taxed as income from employment to the beneficiaries, report the allocations on a T4 slip, not on a T3 slip. For more information, see Guide RC4120, Employers' Guide - Filing the T4 Slip and Summary.

Employee life and health trust (ELHT)

This is a trust, established after 2009 by one or more employers, that meets a number of conditions under subsection 144.1(2) of the Act. The trust's only purpose is the payment of a designated employee benefit (DEBs) for employees and certain related persons (certain limitations apply to the rights and benefits that may be provided to key employees).

Employers can deduct contributions made to the trust, as long as they are for DEBs and meet the conditions in subsection 144.1(4). Employee contributions are permitted, but are not deductible. However, employee contributions may qualify for the medical expense tax credit, to the extent that they are made to a private health services plan.

The trust can deduct amounts paid to employees or former employees for DEBs and can generally carry non-capital losses back or forward three years. Any amount received from an ELHT must be included in income, unless the amount was received as the payment of a DEB. Payments of DEBs to non-resident employees or former employees will generally not be subject to tax under Part XIII.

For more information on ELHT's, designated employee benefits and key employees, see section 144.1 of the Act.

Employee trust

This is a trust. Generally, it is an arrangement established after 1979, under which an employer makes payments to a trustee in trust for the sole benefit of the employees. The trustee has to elect to qualify the arrangement as an employee trust on the trust's first return. The employer can deduct contributions to the plan only if the trust has made this election and filed it no later than 90 days after the end of its first tax year. To maintain its employee trust status, each year the trust has to allocate to its beneficiaries all non-business income for that year, and employer contributions made in the year. Business income cannot be allocated and is taxed in the trust.

For more information, see archived Interpretation Bulletin IT502 - Employee Benefit Plans and Employee Trusts and its Special Release.

Because the allocations are taxed as income from employment to the beneficiaries, report the allocations on a T4 slip, not on a T3 slip. For more information, see Guide RC4120, Employers' Guide - Filing the T4 Slip and Summary.

Environment quality Act trust

A trust under paragraph 149(1)(z.1) of the Act. This is a trust that was created because of a requirement imposed by section 56 of the Environment Quality Act, R.S.Q., c. Q-2. The trust must meet all of the following conditions:

the trust is resident in Canada

the only persons that are beneficially interested are one of the following:

1. Her Majesty in right of Canada

2. Her Majesty in right of a province

3. a municipality (as defined in section 1 of that Act) that is exempt because of subsection 149(1) from tax under Part I on all of its taxable income

Graduated rate estate (GRE)

A graduated rate estate, of an individual at any time, is the estate that arose on and as a consequence of the individual's death, if all of the following conditions are met:

that time is no more than 36 months after the death of the individual

the estate is at that time a testamentary trust

the individual's social insurance number is provided in the estate's return of income for the tax year that includes that time and for each of its earlier tax years that ended after 2015 (36 month period after the death of the individual)

the estate designates itself as the graduated rate estate of the individual in its return of income

no other estate designates itself as the graduated rate of estate of that individual in a return of income for a tax year that ends after 2015

An estate can only be a "graduated rate estate" for up to 36 months following the death of an individual. The estate will cease to be a graduated rate estate if it is still in existence at the end of the 36 months period.

Health and welfare trust (HWT)

Health and welfare benefits for employees are sometimes provided through a trust arrangement under which the trustees receive the contributions from the employer(s), and in some cases from employees, to provide such health and welfare benefits as have been agreed to between the employer and the employees. To qualify for treatment as a HWT, the funds of the trust cannot revert to the employer or be used for any purpose other than providing health and welfare benefits for which the contributions are made. In addition, the employer's contributions to the fund must not exceed the amounts required to provide these benefits. Further, to qualify for treatment as a HWT, the payments by the employer cannot be made on a voluntary or gratuitous basis - they must be enforceable by the trustees should the employer decide not to make the payments required. This arrangement is restricted to one or any combination of the following:

a group sickness or accident insurance plan

a private health services plan

a group term life insurance policy

Under proposed changes, starting in 2021, the CRA will no longer apply its administrative positions with respect to HWTs.

For more information, see Income tax folio S2-F1-C1 - Health and Welfare Trusts.

Hepatitis C trust and Indian residential school trust

These are inter vivos trusts under paragraph 81(1)(g.3) of the Act and are government funded trusts.

established under:

the 1986-1990 Hepatitis C Settlement Agreement

the Pre-1986/Post-1990 Hepatitis C Settlement Agreement

the Indian Residential Schools Settlement Agreement entered into by her Majesty in right of Canada on May 8, 2006

as long as no contribution to the trust, other than contributions provided for under the Agreement, is made before the end of a tax year of the trust, the trust's income is generally exempt from income tax for that tax year.

Insurance segregated fund trust

This is a related segregated fund of a life insurer for life insurance policies and is considered to be an inter vivos trust. The fund's property and income are considered to be the property and income of the trust, with the life insurer as the trustee.

Joint spousal or common-law partner trust

This is a trust created after 1999 by a settlor who was 65 years of age or older at the time the trust was created. The settlor and the settlor's spouse or common-law partner are entitled to receive all the income that may arise from the trust before the later of their deaths. They are the only persons who can receive, or get the use of, any income or capital of the trust before the later of their deaths.

Lifetime benefit trust

This a trust that is at any particular time a lifetime benefit trust with respect to a taxpayer and the estate of a deceased individual if both of the following conditions are met:

immediately before the death of the deceased individual, the taxpayer meets one of the following conditions:

was both a spouse or common-law partner of the deceased individual and mentally infirm

was both a child or grandchild of the deceased individual and dependent of the deceased individual for support because of mental infirmity

the trust is, at the particular time, a personal trust under which:

no person other than the taxpayer may receive or otherwise obtain the use of, during the taxpayer's lifetime, any of the income or capital of the trust

the trustees:

are empowered to pay amounts from the trust to the taxpayer

are required in determining whether to pay, or not to pay, an amount to the taxpayer to consider the needs of the taxpayer including, without limiting the generality of the foregoing, the comfort, care and maintenance of the taxpayer

Master trust

This is a trust. A trust can elect to be a master trust if during the entire time since its creation it met all of the following conditions:

it was resident in Canada

its only undertaking was the investing of its funds

it never borrowed money except for a term of 90 days or less (for this purpose, the borrowing cannot be part of a series of loans or other transactions and repayments)

it has never accepted deposits

each of its beneficiaries is a trust governed by a deferred profit sharing plan, a pooled registered pension plan or a registered pension plan

Mutual fund trust

This is a unit trust that resides in Canada. It also has to comply with the other conditions of the Act, as outlined in section 132 and the conditions established by Income Tax Regulation 4801. There are certain reporting requirements for a mutual fund trust that is a public trust, or public investment trust.

Non-profit organization

This is an organization (for example, club, society, or association) that is usually organized and operated exclusively for social welfare, civic improvement, pleasure, recreation, or any other purpose except profit. The organization will generally be exempt from tax if no part of its income is payable to, or available for, the personal benefit of a proprietor, member, or shareholder. For more information, see archived Interpretation Bulletin IT496 - Non-Profit Organizations.

If the main purpose of the organization is to provide services such as dining, recreational, or sporting facilities to its members, we consider it to be a trust. In this case, the trust is taxable on its income from property, and on any taxable capital gains from the disposition of any property that is not used to provide those services. The trust is allowed a deduction of $2,000 when calculating its taxable income. Claim this on line 54 of the T3 return.

For more information, see archived Interpretation Bulletin IT83- Non-profit organizations - Taxation of income from property.

Nuclear fuel waste Act trust

A trust under paragraph 149(1)(z.2) of the Act. This is a trust that was created because of a requirement imposed by subsection 9(1) of the Nuclear Fuel Waste Act. The trust must meet all of the following conditions:

the trust is resident in Canada

the only persons that are beneficially interested are one of the following:

1. Her Majesty in right of Canada

2. Her Majesty in right of a province

3. a nuclear energy corporation (as defined in section 2 of that Act) all the shares of the capital stock of which are owned by one or more persons described in clause (A) or (B)

4. the waste management organization established under section 6 of that Act if all shares of its capital stock are owned by one or more nuclear energy corporations described in clause (C)

5. Atomic Energy of Canada Limited, being the company incorporated or acquired in accordance with subsection 10(2) of the Atomic Energy Control Act

Personal trust

This is a trust (other than a trust that is, or was at any time after 1999, a unit trust) that is one of the following:

a graduated rate estate

a trust in which no beneficial interest was acquired for consideration payable directly or indirectly to:

1. the trust

2. any person or partnership that has made a contribution to the trust by way of transfer, assignment or other disposition of property

For 2017 and subsequent tax years, only a graduated rate estate automatically qualifies as a personal trust without regard to the circumstances in which beneficial interest in the trust has been acquired.

Pooled registered pension plans (PRPP)

Pooled Registered Pension Plans must operate through an arrangement acceptable to the Minister. All property held in connection with a PRPP is required to be held in trust by the administrator on behalf of the plan members. As a result, a PRPP is generally treated as a trust for tax purposes, the administrator is the trustee of that trust, the members are the beneficiaries, and the trust property is the property held in connection with the plan. A pooled registered pension plan trust will be excluded for purposes of the 21 year deemed disposition rule and other specified measures. When certain criteria are met, a pooled registered pension plan trust will be exempt from Part 1 tax.

For more information, go to Pooled registered pension plans.

Qualified disability trust (QDT)

A qualified disability trust for a tax year is a testamentary trust that arose on the death of a particular individual that jointly elects, with one or more beneficiaries under the trust, in its T3 return of income for the year to be a qualified disability trust for the year. In addition, all of the following conditions have to be satisfied:

the election must include each electing beneficiary's Social Insurance Number

each electing beneficiary must be named as a beneficiary by the particular individual in the instrument under which the trust is created

each electing beneficiary must, for the beneficiary's tax year in which the trust's year ends, be eligible for the disability tax credit

no beneficiary who elects with the trust to be a qualified disability trust for the year can elect with any other trust for the other trust to be a qualified disability trust for the other trust's tax year that ends in the beneficiary's tax year

the trust must be factually resident in Canada (i.e., resident determined without regard to section 94 of the Income Tax Act)

the trust is not subject to the recovery tax for the year

For a trust that was a qualified disability trust in a previous tax year, refer to "Line 11 - Federal recovery tax" in Guide T4013, T3 Trust Guide.

Qualifying environmental trust (QET)

Generally, this is a trust resident in Canada or a province, or a corporation resident in Canada that is licensed or otherwise authorized under the laws of Canada or a province to carry on in Canada the business of offering to the public its services as trustee, or that is not an excluded trust and maintained at that time for the sole purpose of funding the reclamation of a qualifying site in Canada or in the province that is, or may become, required to be maintained under the terms of a qualifying contract, or a qualifying law, and that had been used primarily for, or for any combination of:

the operation of a mine

the extraction of clay, peat, sand, shale or aggregates (including dimension stone and gravel)

the deposit of waste

If the trust was created after 2011, the operation of a pipeline, as long as the other requirements defined in subsection 211.6(1) are met

Under the definition, the trust is, or may become, required to be maintained under the terms of a contract entered into with the federal or provincial Crown of if the trust was established after 2011, by an order of a tribunal constituted under a federal or provincial law. Certain conditions exist that may exclude a trust from being a QET. For more information, please see the definition of a QET in subsection 211.6 (1) of the Act.

Real estate investment trust (REIT)

A trust is a REIT for a tax year, if it is resident in Canada throughout the year and meets a number of other conditions, including all of the following:

at least 90% of the trust's non-portfolio properties must be qualified REIT properties

at least 90% of the trust's gross REIT revenue for the tax year must be derived from rent, from real properties, interest, capital gains from dispositions of real properties which are capital properties, dispositions of eligible resale properties, dividends and royalties

at least 75% of the trust's gross REIT revenues for the tax year must be derived from rent from real properties, interest from mortgages on real properties and capital gains from dispositions of real properties which are capital properties

Registered disability savings plan (RDSP) trust

An RDSP trust has to complete and file a T3 return if the trust has borrowed money and subparagraph 146.4(5)(a)(i) or 146.4(5)(a)(ii) of the Act applies. If this does not apply and the trust carried on a business or held non-qualified investments during the tax year, you have to complete a T3 return to calculate the taxable income from the business or non-qualified investments, determined under subsection 146.4(5) of the Act. If the trust is reporting capital gains or losses, it has to report the full amount (that is, 100%) on line 01 of the T3 return.

Registered education savings plan (RESP) trusts

If an RESP trust held non-qualified investments during the tax year, you have to complete and file a T3 return to calculate the taxable income from-non-qualified investments, determined under subsection 146.1(5) of the Act. If the trust is reporting capital gains or losses, it has to report the full amount (that is, 100%) on line 01 of the T3 return.

Registered retirement savings plan (RRSP), or Registered retirement income fund (RRIF) trusts

An RRSP, or RRIF trust has to complete and file a T3 return if the trust meets one of the following conditions:

the trust has borrowed money and paragraph 146(4)(a) or 146.3(3)(a) of the Act applies

the RRIF trust received a gift of property and paragraph 146.3(3)(b) of the Act applies

the last annuitant has died and paragraph 146(4)(c) or subsection 146.3(3.1) of the Act applies. If this is the case, claim an amount on line 43 of the T3 return only if the allocated amounts were paid in accordance with paragraph 104(6)(a.2) of the Act

If the trust does not meet one of the above conditions and the trust held non-qualified investments during the tax year, you have to complete a T3 return to calculate the taxable income from non-qualified investments, determined under subsection 146(10.1) or 146.3(9) of the Act. If the trust is reporting capital gains or losses, it has to report the full amount (that is, 100%) on line 01 of the T3 return.

If the trust does not meet one of the above conditions and the trust carried on a business, you have to complete a T3 return to calculate the taxable income of the trust from carrying on a business. Do not include the business income earned from qualified investments for the trust.

Retirement compensation arrangement (RCA)

This arrangement exists when an employer makes contributions for an employee's retirement, termination of employment, or any significant change in services of employment. For more information, see Guide T4041, Retirement Compensation Arrangements Guide.

Salary deferral arrangement (SDA)

Generally, this is a plan or arrangement (whether funded or not) between an employer and an employee or another person who has a right to receive salary or wages in a year after the services have been performed. For more information, see archived Interpretation Bulletin IT529 - Flexible Employee Benefit Programs.

Specified investment flow-through (SIFT) trust

This is a trust (other than a trust that is a real estate investment trust for the tax year or an entity that is an excluded subsidiary entity) that meets all of the following conditions at any time during the tax year:

the trust is resident in Canada

investments in the trust are listed or traded on a stock exchange or other public market

the trust holds one or more non-portfolio properties

For more information, go to Specified investment flow-through (SIFT) trust income and distribution tax.

Specified trust

This is a trust that is:

an amateur athlete trust

an employee life and health trust

an employee trust

a master trust

a trust governed by:

a deferred profit sharing plan

an employee benefit plan

an employee profit sharing plan

a foreign retirement arrangement

a pooled registered pension plan; a registered disability savings plan

a registered education savings plan

a registered pension plan

a registered retirement income fund

a registered retirement savings plan

a registered supplementary unemployment benefit plan

a tax-free savings account trust

a related segregated fund trust

a retirement compensation arrangement trust

a trust whose direct beneficiaries are one of the above mentioned trusts

a trust governed by an eligible funeral arrangement or a cemetery care trust

a communal organization

a trust where all or substantially all of the property is held for the purpose of providing benefits to individuals from employment or former employment

Spousal or common-law partner trust

A post-1971 spousal or common-law partner trust includes both a testamentary trust created after 1971, and an inter vivos trust created after June 17, 1971. In either case, the living beneficiary spouse or common-law partner is entitled to receive all the income that may arise during the lifetime of the spouse or common-law partner. That spouse or common-law partner is the only person who can receive, or get the use of, any income or capital of the trust during their lifetime.

A pre-1972 spousal trust includes both a testamentary trust created before 1972, and an inter vivos trust created before June 18, 1971. In either case, the beneficiary spouse was entitled to receive all the income during the spouse's lifetime, and no other person received, or got the use of, any income or capital of the trust. These conditions must be met for the period beginning on the day the trust was created, up to the earliest of the following dates:

the day the beneficiary spouse dies

January 1, 1993

the day on which the definition of a pre-1972 spousal trust is applied

Tax-free savings account (TFSA) trust

A TFSA trust has to complete and file a T3 return if the trust meets one of the following condition:

If a TFSA trust carried on a business or held non-qualified investments during the tax year, the trust will be taxable to the extent of the income earned from that business or those investments (Type of trust code 32 on the T3 Return). For more information, see "Line 22 - Non-qualified investments for TFSA, RRSP, RRIF, RDSP, and RESP trusts" in Guide T4013, T3 Trust Guide.

When the last holder of a TFSA dies, and the trust still exists after the exempt period, it is deemed to dispose of all its property at fair market value and immediately reacquire it at the same value on January 1 following the end of the exempt period. The trust becomes a taxable inter vivos trust from that point on (Type of trust code 318 - TFSA - Qualified Investments on the T3 Return) and subject to the normal rules for inter vivos trusts. Additionally, in its first year as an inter vivos trust, the trust is taxable on any income and gains earned but not distributed during the exempt period. For more information go to Tax-Free Savings Account.

Unit trust

This is a trust for which the interest of each beneficiary can be described at any time by referring to units of the trust. A unit trust must also meet one of the three conditions described in subsection 108(2) of the Act.

Information for public trusts and public investment trusts

Public trust

A public trust is a mutual fund trust whose units are listed on a designated stock exchange in Canada.

Public investment trust

A public investment trust is a public trust in which all or substantially all of the fair market value of its property comes from:

units of public trusts

partnership interests in public partnerships

shares of the capital stock of public corporations

any combination of those properties

If you are a public trust, you must forward certain tax information to the website of CDS Innovations Inc. within 60 days after the end of your tax year. The filing period is extended to 67 days for a public investment trust.

Once you post the tax information on the CDS website, you must notify the Canada Revenue Agency CRA of the date of your compliance by emailing the notification to PUBTR-FO-G@cra-arc.gc.ca .

Trust codes

Testamentary trusts

code 001, Spousal or common-law partner trust

code 900, a testamentary trust that is not identified by one of the other testamentary trust codes

code 901, Lifetime Benefit trust

code 903, an estate that designated itself as a graduated rate estate (applicable for tax years ending after 2015)

code 904, a qualified disability trust (applicable for tax years ending after 2015 when Form T3QDT, Joint Election for a Trust to be a Qualified Disability Trust is submitted)

Inter vivos trusts

code 11, Spousal or common-law partner trust

code 12, Unit trust

code 13, Mutual fund trust

code 14, Communal organization trust

code 15, Employee benefit plans trust

code 19, Employee trust

code 20, Blind/revocable trust

code 21, Personal trust

code 22, joint Spousal or common-law partner trust

code 23, Alter ego trust

code 24, Master trust

code 28, Specified income flow-through (SIFT) trust

code 32, Tax-free savings account (TFSA) trust

code 33, Employee life and health trust (ELHT)

code 161, Insurance segregated fund-fully

code 162, Insurance segregated fund-partially registered trust

code 163, Insurance segregated fund-non-registered

code 180, Non-profit organization-subsection 149(5) trust

code 181, Non-profit organization trust-subsection 149(1)(l)

code 300, Other trust

code 301, Registered retirement savings plan (RRSP) trust liable for tax under Part I of the Act

code 302, Registered retirement income fund (RRIF) trust liable for tax under Part I of the Act

code 303, Registered disability savings plan (RDSP) trust liable for tax under Part I of the Act

code 304, Real estate investment trust (REIT)

code 305, Health and welfare trust (HWT)

code 306, Salary deferral arrangement (SDA)

code 313, Pooled registered pension plans (PRPP)

code 314, Environment Quality Act trust described in paragraph 149(1)(z.1) of the Act

code 315, Nuclear Fuel Waste Act trust described in paragraph 149(1)(z.2) of the Act

code 316, Hepatitis C trust described in paragraph 81(1)(g.3) of the Act

code 317, Indian residential schools trust described in paragraph 81(1)(g.3) of the Act

code 318, for a Tax-free savings account (TFSA) trust liable for tax under Part I of the Act

code 319, for a Registered education savings plans (RESP) trust liable fortax under Part I of the Act

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joint spousal or common-law partner trust

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mutual fund trust. non-profit organization

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A trust is either: Each trust has different tax rules. At the bottom of this page you will find information on public trusts and public investment trusts and the different trust codes. A testamentary trust is a trust or estate that is generally created on and as result of the death of the person.

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This website goes into detail about considering a trust fund for your kids even if you aren't rich. So this means if you are middle class or lower class you should look into trust funds. As well it discusses incentive trusts where the beneficiary will only receive the contents of the trust left to them if they meet the requirements. These requirements can vary but some of the more common ones include having an education so that they are not simply just living off the trust aka a degree or diploma of some sort.

I included this website because I thought the information was very useful as well I liked how it still explained the downfalls of trusts like the fees associated with it (taxes and lawyer fees) instead of just glorifying the entire process.

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Some people are lucky enough to be born to well-connected families with vast fortunes, leaving those of us who rely on our wits and hard labour with rigid attitudes about the type of kids who benefit from trust funds.

Lately, the practice of leaving large inheritances may be increasingly falling out of favour - at least for celebrities.

Concerned about potentially ruining the lives of his six adult children, British musician Sting has been vocal about his decision not to share his estimated $300-million fortune. According to reports, the late actor Phillip Seymour Hoffman rejected his accountant's suggestion to leave a portion of his $35-million estate to his children because he didn't want them to be "trust fund kids."

"For a lot of very wealthy individuals, and I've dealt with them a lot in my career, their biggest stress is, 'Am I going to wreck my kids? Am I going to take the incentive away from them to earn a living and to be a productive member of society by even setting up a trust fund for them?"' says Cindy Crean, a managing director at SunLife Financial Global Investments in Toronto.

But a trust fund can be the right decision in certain circumstances, said Crean, even for average income earners.

A trust is usually set up to provide financial security for children or other family members. It can contain a number of assets beyond cash and mutual funds, such as property. Trusts function differently than bank accounts, as the assets are deposited at once and beneficiaries usually only gain direct access when they reach adulthood. They also differ from wills as they aren't subject to probate.

Trusts were traditionally used by high net-worth families as a hedge to protect relatives from the fallout of potentially ruinous life choices such as divorces, business ventures and court cases.

Wealthy families have long relied on trusts as a tax planning tool, says Tony Maiorino, head of RBC Wealth Management Services. It's also an option that's becoming popular with middle-class clients who want to provide money, for example, to their grandchildren.

"Family trusts are a great example of that," he says. "If you have kids 1 / 8or grandkids 3 / 8 in private schools or heavily involved in sports or other activities that are very costly, a trust can be used to fund those activities and provide the income to that individual at a more favourable tax rate than just simply giving the money."

Parents may also want to look into one as an option to practice income-splitting with children over the age of 18, he adds.

A time-honoured method of asset protection, trusts can play a critical role in planning for children with disabilities that may hinder their ability to provide for themselves as adults.

"A lot of people don't think they have a lot of money but, let's say, you have husband and wife or partners who own a house and have some insurance, for example, and something happens to both of them...there would probably be more money than they think. So you really have to think that through, and think what would fall into your estate, into your kids' hands, if something were to happen to both of you. There may be more money than they think," says Crean.

But how to prevent your beneficiaries from blowing it all?

"It takes careful thought," says Crean. "That's where it's really important to sit down with an estate planning professional, a lawyer who has experience in estate planning and talk to them about what your wishes are, what your concerns are, and they can help you to draft up an appropriate trust, be it a trust that you set up while you're alive or a trust that you set up through your will."

The way the money is distributed depends on the type of trust and the conditions set out, she adds.

Testamentary trusts are incorporated into wills and prevents your beneficiaries from accessing the money until after your death. An inter-vivos trust is considered "a gift" and allows beneficiaries to access the fund while you are still alive.

An incentive trust may be the best option for people concerned about children or grandchildren's spendthrift ways. Beneficiaries will only see a pay out if they earn a degree, for example. Or, alternatively, "For every dollar that they earn, the trust will pay them a dollar. So they have to be earning money before they get any money from the trust," says Crean.

It all comes back to what you teach your kids while you're alive, she notes.

"No trust is going to fix them while they're already kind of spoiled. So just raising your kids to be financially responsible and giving them the impetus to work, even if you do have the money to provide for them."

The fees associated with running a trust, however, may be enough to put people off. A trust is considered separate legal entity and is taxed on its income annually and new legislation passed in this year's federal budget means that by 2016, taxes on testamentary trusts will no longer be adjusted to the beneficiary's income level and will be taxed at the top marginal rate, Maiorino says.

Corporate trusts also charge to manage the fund. And lawyer fees will always be an ever-present reality.

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Consider a trust fund for your kids even if you're not rich

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Some people are lucky enough to be born to well-connected families with vast fortunes, leaving those of us who rely on our wits and hard labour with rigid attitudes about the type of kids who benefit from trust funds. Lately, the practice of leaving large inheritances may be increasingly falling out of favour - at least for celebrities.

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This website talks about the different roles that are assumed through having a trust; trustee, beneficiary etc... Also goes into detail about wills and how they compare to trusts. Trusts are better for privacy reasons while wills are a bit more public in that matter.

I put this website into my assignment because it also tells you the steps to start a trust fund so you can see how to manage everything and if a trust is well suited to your needs you will know the steps to get it started. It also makes you start to think of who you are going to designate as your trustee.

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Whenever you hear the word trust fund, you might envision some spoiled kid who'll never have to work a day in their life. You might think trust funds are just for the ultra-wealthy. But as with so many personal finance topics, it's more complicated than that.

Trusts can actually be helpful estate planning tools. If you want to preserve your wealth and potentially avoid having the state divide your assets upon incapacitation or death, funds held in trust might be of interest to you and your family.

What is a trust fund?

The term trust fund refers to assets that are held in a trust. In essence, the trust has funds or assets that are created by a grantor, managed by a trustee and eventually distributed to beneficiaries. Assets that can fund a trust vary and could include one or more of the following:

A trust is a rulebook of sorts that determines how your wealth and assets will be distributed to beneficiaries in a specific way and at specific milestones.

The trust itself doesn't hold any assets, per se, but it does determine how they are handled and who has access to them. People use trusts to avoid probate, reduce taxes, preserve privacy in asset transfer and give to charitable causes.

Knowing more about trusts will help you determine if this is an estate planning tool worth exploring for your personal use.

Who needs a trust fund?

Although you might think trusts are for the mega-rich, you'd be surprised at how accessible and appropriate they may be for anyone's financial planning needs. There are different types of trusts that might be best for varying degrees of net worth and asset types. The administrative costs related to setting up and maintaining each type of trust vary, too.

You should consider a trust if you have a substantial amount of assets in terms of cash, stocks bonds, real estate, and business interests. If you'll want to reduce your tax exposure and avoid the probate process while transferring your assets to your heir, then you should consider creating a trust.

How does a trust fund work?

A trust is a legal entity that is set up to manage and distribute your assets. It works through legally binding terms that dictate how your wealth is managed at various points in your life. One way to think of a trust is as a "mini corporation" that handles your money. The terms of the trust are like the corporation by-laws that determine how the trust should operate.

If you are the person setting up the trust you are considered the grantor, or trustor. As the grantor, you designate a trustee which is a neutral third party who administrates the fund's operation and distribution of assets to beneficiaries. Beneficiaries can be your individual heirs, a group of people, a corporation, or a charity.

Depending on the type of trust you have, can also be the trustee or designate one. The trustee could be one of your beneficiaries or you can choose a corporate trustee. A corporate trustee can be a trust company that has vast knowledge on matters pertaining to managing a trust.

A child can be named trustee although they would likely still need support regarding tax, accounting, and legal issues. Either way, professional help is needed to set up and administer the assets of trust. The costs associated with the management of a trust should also be considered and discussed with your financial advisor and estate lawyer.

Trusts operate differently based on the type of trust you decide to set up. Though there are many types of trust, the most common distinction is between a revocable trust and an irrevocable trust. A revocable trust remains in effect while the grantor is alive and can be changed, terminated or altered while the grantor is alive. In this case, the grantor can also be the trustee and beneficiary until their incapacitation or death. An irrevocable trust cannot be changed during the lifetime of the grantor nor cannot it be terminated upon the grantor's death. A revocable trust becomes irrevocable once the grantor dies.

The type of trust you will need is based on your goals. Formerly, a revocable trust was desirable when it came to protecting an estate from taxes. However, recent changes in the U.S. tax code have made this issue somewhat moot for the vast majority of people, as the current exemption on estate taxes is $11.4 million per individual.

Consequently, the best use for the revocable might be in the case of incapacitation. If this were to occur, you could use this type of trust to designate a trustee to act on your behalf when you are unable to do so. Another benefit of this type of trust is that it may not be subject to the probate process, allowing you to transfer assets to your beneficiaries without court involvement.

An irrevocable can be used to protect assets from creditors, taxes and even claims of beneficiaries. This type of trust can also remove assets from your estate to reduce or eliminate estate and gift taxes. This type of trust would be ideal if you've got a sizable estate-perhaps in the multi-million dollar range or more.

When setting up trusts you need to be mindful of the costs it takes to create and administer them. Because a trust can be cost-prohibitive on many accounts, you need to make sure that you've got a sufficient amount of assets to help cover those costs. You'll also want to make sure the administrative costs don't erode the value of your estate, either.

Not all trusts are expensive. For example, a simple land trust can be just a few hundred dollars to create and much less than that to maintain it on an annual basis. There are other types of trusts that you should know about, as well:

Marital trusts: This trust is designed to transfer assets from one spouse to another. The benefit of this type of trust is that assets can be transferred to a surviving spouse without tax consequences.

Charitable trust: This trust can accomplish philanthropic goals. The charitable trust allows you to give money to causes you care about when you pass away. There are different ways to set up this type of trust such as giving a lump sum or a series of payments over a certain amount of time.

Generation-skipping trusts: This trust is designed to transfer assets to your grandchildren. It will help you avoid paying estate taxes when assets pass to your children and then again to your grandchildren.

Insurance trust: Another type of irrevocable trust, is set up to be the primary beneficiary of a life insurance policy. Upon your death, the proceeds of the policy are held in trust and distributed to the beneficiaries named in the trust in increments over their lifetime or until the funds run out.

Special needs trust: This trust will ensure your special needs beneficiaries are taken care of in the case of your death. Having this trust in place should not hinder their ability to receive their government benefits.

Spendthrift trust: Ideal for beneficiaries who might be at risk for squandering their inheritance with imprudent spending habits. This kind of trust can remain in existence for a period of time after the grantor dies so that funds can be distributed over a period of time to beneficiaries rather than all at once.

How to set up a trust fund

Once you determine that you've got enough assets that warrant the establishment of a trust, it's a good idea to put your trust in place.

To set up a trust, you'll want to engage the help of both a financial planner or advisor and an estate lawyer. Your financial advisor can help you identify some financial goals along with desires you might have for your wealth once you die. They can also give you information on the various types of trusts to choose from along with ideas on what might work best for your situation.

An estate lawyer can capture these desires in the provisions of the trust known as the trust agreement. In this agreement you'll need to outline:

Wills vs Trusts

A will is another estate planning tool that can help carry out your desires for distributing your assets upon your death. A will can be much less expensive to prepare and administer but it may not have the same flexibility as a trust.

For instance, even if you have a will, a will, unlike a trust, must be "proved" in probate court upon your passing. You should also be aware that the probate process is documented on public record. As each stage of the probate process goes on, these records are updated in the jurisdiction wherein the probate proceedings take place. For some, this lack of privacy can be unsettling-especially those who expect to pass on large sums of wealth to their beneficiaries.

A trust is ideal for people want to transfer assets with privacy and with the least amount of tax exposure possible.

In some cases, a will and trust can work together. For instance, it's not uncommon for people to take title to real estate in a land trust, then give more detail around what they want to happen with the trust in the language of their will. This can work with other asset classes as well but real estate is probably the most known example of how a will and trust can work in tandem.

Last Updated May 14, 2020

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Whenever you hear the word trust fund, you might envision some spoiled kid who'll never have to work a day in their life. You might think trust funds are just for the ultra-wealthy. But as with so many personal finance topics, it's more complicated than that.

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This video is a short and simple version of explaining what trust funds are. It explains how they can help you direct your wealth to other individuals without it being in a will. It also says how trust funds can help you save on taxes depending on where you are located.

I wanted to share this video because it is a simple video that explains all the major aspects of a trust fund in a short amount of time. So anyone who wants to learn the basics quickly will have a good basic and beginner understanding of what a trust fund is and how you can use it to your own financial desire.

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Trust Funds Explained in One Minute: Definition/Meaning, Examples and Tips

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This video gives more background to what a trust fund is and how it works. It has more substance behind it talking about a bit of the history of trust funds as well. It discusses how more upper class families use trust funds but now middle class families are starting to use them more frequently as well. Talks about protecting assets from losses if a greedy law firm tries to take more from you. Tells us how the trust fund can even protect people from themselves so that if you do not trust yourself or a family member to spend it correctly you can put limitations on it.

I wanted to share this video because it gives more background info into trust funds and shows that you can put certain clauses within the trust fund. This is to protect the assets within that trust even after the trust fund is made available to the beneficiary.

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This video talks about how trust funds can contribute to generational wealth. Generational wealth is basically the concept of helping your further generations; sons, daughters, grandsons, granddaughters etc.. stay financially wealthy and be able to live a fruitful life. Especially with all of our living expenses going up constantly being able to provide for your family and even extended relatives is a very nice thing to do. It also discusses how you can be put into a lower tax bracket if you use the trust fund properly so you will save on taxes as well.

I included this video because I think now more than ever especially with how much everything costs this generation is going to suffer financial hardship. If more people know about how trust funds can contribute to generational wealth maybe it'll save some younger generation a bit of hardship.

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Using Trust funds to build generational wealth

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This video I chose lets you know about all the benefits of using a trust to own shares within a company. It goes over a basic definition of a trust as well. Trusts can also help protect your shares within a company. So for example if a person was not able to pay off her company debt since the company can sometimes go for personal assets that persons shares will be protected. This is just one of the many benefits of using a trust for shares.

I used this video within my assignment because trusts have many benefits that people don't know about. I personally never knew that trusts can protect your personal assets even when you are being sued to pay back some sort of debt you owe.

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What is a Trust? | Benefits of Using a Trust to Own Shares in a Company | LegalVision

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This image I chose shows you the people involved within a trust fund and the different assets that can be included in the trust fund.

I wanted to include this image because it shows multiple aspects of the trust fund rather than just stating its a "money only" kind of fund.

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This image shows you all the different words within Trust Fund that have meaning to trust funds in the financial world.

I included this photo because there is a lot more depth behind trust funds. As well finance is a very broad term that trust funds is a part of just like all the other words included. It gets you thinking about what else is connected to this topic.

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For this assignment I decided to dive deeper into Trust Funds and how to manage them properly. I am going to go into detail about some of the rules and ways to use trust funds. As well I want to talk about some of the ways trust funds can be accessed and when they are able to be accessed.