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

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

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The thing I learned about my topic that surprised me the most is that Trust Funds are not just for the wealthy and famous. We have all heard the term "trust fund babies" for rich parents that set up trust funds for when their kids get to 18 so they don't ruin their riches before they become of age - but Trust Funds come in so many different types for different purposes, for common folk like you and I.

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

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

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As I referenced earlier, Trust Fund creation for the purpose of establishing lifetime Capital Gains exemption in Canada is relevant to me as my parents have invested in real estate and put it in my name recently. I understand that if I ever sell this property and have not lived in it as a principal residence will be subjected to Capital Gains. My father is an accountant so he has explained the need and purpose for a Trust Fund to absorb or alleviate any possible tax levy in the future so we have taken the necessary step to create such a fund for this purpose.

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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?

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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?

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I would have to say PLAN FOR THE FUTURE!  Meaning as it pertains to Trust Funds, create a living trust.  Like a living will, it basically is a Trust fund that is created while someone is living, for the purpose of transferring assets to children or grandchildren, the primary benefit being the assets avoid probate (complicated and tax involved process of asset distribution), which leads to faster asset distribution to the beneficiaries. This simplicity for the beneficiaries makes things a lot easier for assets to change hands without involving more people like lawyers and having to pay additional tax.

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In this image, you see the basic principles of a Trust Fund involving the Grantor, Trustee and Beneficiary, with an appropriate work flow as it passes from one person to another.
I chose this image because in its simplest form it illustrates how a Trust Fund is created by a Grantor for the purpose of a Trustee to manage and facilitate transfer of assets to a Beneficiary. I found it very useful to illustrate how exactly the process works.

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In this website, Trust Funds are explained and addressed on topics of, what they are, who needs them, how they work, how to set up, how to manage, etc. Consider it a tutorial of the basics covered whether you had knowledge of trust funds or not previously.
I chose this website because it comes from a reputable source, www.wealthsimple.com, for content and validity. I found it useful how the questions were asked and answered in a structured format that allowed for easy following and learning.

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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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Video #1:  Trust Funds Explained in One Minute: Definition/Meaning, Examples and Tips

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Video #1:  Trust Funds Explained in One Minute: Definition/Meaning, Examples and Tips

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In this video, Trust Funds are summarized for what they are in terms of defining them and establishing a meaning in simple terms.  Along with an explanation, comes examples of Trust Funds and Tips on how to use them and why they would be useful in certain situations.
I chose this video, because it's a simplistic, short explanation of a topic that many find complex. I also liked the use of cartoon characters to make the topic fun and invite learning. I found useful in this video particularly that illustrates Trust Funds are not just for "rich people", they serve a purpose for everyday folk like you and me as well.

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

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Hi, and welcome to my Padlet.  In this Padlet, the topic of conversation is Trust Funds - How to Manage.  In this Padlet, you can expect to learn about certain concepts of Trust Funds as it relates to How to Manage them including;  1) What is a Trust Fund?  2) What are different types of Trust Funds?  3) Who needs a Trust Fund?  4) How does a Trust Fund work?  5) How to set up a Trust Fund?  6) How to Manage a Trust Fund?  We will accomplish this through the use of selected videos, websites and images with accompanying analysis to explain further the topic to help answer the preceding questions.  Let's dive in!

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In this video, Trust Funds are explained on the fundamentals of how they work.  Important concept here is that Trust Funds help manage and protect hard earned assets for any type of individual like a home owner, business person or investor.  Also, within a Trust Fund, various items can be placed inside of one like Cash, Mutual Funds, Bonds and Real Estate.  It goes on to list advantages of Trust Funds and why you need them which helps explain the reasoning behind setting one up in the first place.
I chose this video because it identifies the 3 key principles of a trust fund, that is; 1) Grantor, 2) Beneficiary and 3) Trustee.  I found it useful to show these 3 key people as to how a Trust Fund is set up and I really enjoyed the inclusion of music as it makes the topic fun all over again and keeps you engaged.

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In this website, as the title says, it's Trust Funds for Dummies.  This series of internet content has always been very popular to help illustrate to people topics in a "funny" way.  Bullet points are made and explained on various topics as they relate to Trust Funds.
I chose this website, because people relate to feeling "stupid" when it comes to topics they know little or nothing about. The "dummies" series has a cult following for valuable information in a creative way. I found it useful that this topic was covered in the dummies section as it is usually a very common search word when people are looking for information.

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A brief introduction to estate planning via trusts, what they are, and what you need to know before setting one up.

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What Is a Trust?

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Image #2:  Pictorial Explanation of Trust Fund Even Better

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Image #2:  Pictorial Explanation of Trust Fund Even Better

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In this image, I think Trust Fund is portrayed perfectly for which each particular impacted party involved is displayed for their role and what products are involved.  Again, the flow is explained from creation to execution with the products within a Trust Fund included as well.
I chose this image because within one image it captures the essence of who is involved in a Trust Fund, what financial instruments can be included in one and lastly how it is executed. I found extremely useful the simplicity of this like a math equation of combining the three impacted parties equals a completed Trust Fund transaction.

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Please click here if you are not redirected within a few seconds.

Images
What is a trust fund? How does it work? - Market Business News

marketbusinessnews.com

Images may be subject to copyright.

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Please click here if you are not redirected within a few seconds. Images What is a trust fund? How does it work? - Market Business News marketbusinessnews.com Images may be subject to copyright.

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Video #3:  Who needs Trust Funds & Types of Trust Funds

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Video #3:  Who needs Trust Funds & Types of Trust Funds

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In this video, it dispels the myths of who really needs and uses trust funds.  It brings together nicely the information presented in the two previous videos with pictorial illustrations of how Trust Funds work, who benefits from them, what they are made of and the different types of Trust Funds.
I chose this video because it really encompasses a holistic view of all the facets of Trust Funds from creation, purpose, benefit and execution for all walks of life. I found it useful how the illustrations helped you to "visualize" the concept for people that learn through interaction more so than just reading text.

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Website #3:  An overview of the types of trust in Canada

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Website #3:  An overview of the types of trust in Canada

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In this website, types of Trust Funds are discussed in Canada.  This website brings to light the various types of Trust Funds and how each are unique in terms of their benefits and purpose.
I chose this website, because it is from a Canadian Law Firm that is both credible and informative for the purposes of this topic. I found it useful how each type of Trust Fund was described and presented for content purposes in a structured format.

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Osuji & Smith | Employment Lawyers Calgary | Business Lawyers

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If you want to do Estate planning, you must know the types of trusts available for you. A trust is a medium for holding and transferring family assets.

Trust serves many purposes. By switching income to family members in lower tax brackets, it helps to reduce taxes. It works as a safeguard to young inheritors by watching over their property until they come to the right age. It can save the property from eroding abruptly by controlling the impulsive member's payout.

What Is a Trust?

Trust is, in short, a fiduciary relationship. It occurs when one party, known as a trustor, gives the right to hold the property, known as the trustee, to manage it for a third party, the beneficiary.

Trust provides legal protection to the truster's property. It is established to make sure that the trustor's property gets distributed or spent according to his/her wish. Trust can be formed to run the charity work when the trustors are gone.

Types of Trust

There are mainly two types of trust- Testamentary trust and living trust. Every trust you see either a testamentary trust or a living trust.

Testamentary Trust

A testamentary trust is established upon the death of the testator. It is stated in his/her will. There could be more than one testamentary trust in a will.

A testamentary trust needs four parties to complete -

Settlor/Trustor: The person who wants to create trust as a part of his/her will. He/she is also known as the grantor.

Trustee: The person who manages the property of the trustor for the benefit of the third party. He is usually appointed by the settlor. The probate court may also appoint him/her.

Beneficiary: The person/persons who are going to receive the benefit of the trust.

Probate court: Well, not accurately a party, but it supervises the trustee's management of the trust.

Living Trust

A trust that is established during the lifetime of the trustor is called a living trust. It is also familiar as "inter vivos" trust. It is the type of trust that is used in estate planning. It makes the assets more easily transferable. Most importantly, it helps the trustor to avoid the delay and expense of probate.

Trust can be categorized into the following two types-

Revocable Trust

A trust that can be altered or obliterated according to the wish of the trustors is called revocable trust.

Irrevocable Trust

As the name suggests, this trust can't be changed or canceled once it gets established.

As you can see, a testamentary trust is irrevocable trust whether inter vivos trust can be revocable or irrevocable.

Now that you get an overview of the main types of trust let's dig into some important specific trusts in Canada.

Spousal trust

A spousal trust is established for the benefit of the surviving couple and the next generation. The trust may be formed to provide allowance to the surviving couple and reserve capital for the next generation.

Alter Ego Trusts and Joint Partner Trusts

These are some particular types of trusts in Canada. You need to at least 65 years old to qualify for alter ego trusts or joint partner trusts.

In alter ego trust, the settlor is only entitled to receive the income during his/her lifetime.

If the settlor makes his/her spouse or common-law partner beneficiary, then it will be called joint partner trusts.

The only difference from alter ego trust is both the settlor and spouse is entitled to receive all the income of the trust.

Both of these trusts are inter vivos trust. Only elderly Canadian people are eligible for this trust. These trusts are very popular as tax reduction policy.

Trust for individuals with disabilities

This trust can either be testamentary trust or inter vivos trust. It is used to provide lifelong allowance to beneficiaries with disabilities.

Insurance trust

An insurance trust is only for those who adopt a life insurance policy. It is established separately from a person's estate. Other aspects of trust are like testamentary trust.

Conclusion

Trust is something that you can put your trust when you are dead. That's why it's so closely associated with estate planning. If you have a clear view of types of trust, then it will be easier for your estate planning.

If you want to know more about trust or trust fund, then contact us. Our professional team is always there to help you.

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Osuji & Smith: Calgary Employment, Business & Family Lawyers

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An overview of the types of trust in Canada

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If you want to do Estate planning, you must know the types of trusts available for you. A trust is a medium for holding and transferring family assets. Trust serves many purposes. By switching income to family members in lower tax brackets, it helps to reduce taxes.

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Video #4:  Using a Family Trust for Lifetime Capital Gains Exemption in Canada

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Video #4:  Using a Family Trust for Lifetime Capital Gains Exemption in Canada

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In this video, you will get an example of how setting up a family trust fund in Canada will help alleviate tax on capital gains in Canada.  This illustrates exactly how a trust fund can be beneficial as we all like to pay less taxes in Canada where we are so heavily taxed it seems on everything.
I chose this video because I am super interested in this topic of saving tax on potential capital gains and it gives everyone a means to use as these situations apply to many people. I found it useful how working with an accountant and lawyer can help navigate this topic and again, put money back in your pocket having to avoid levied tax on realized capital gains over a lifetime.

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#7 -- Using a Family Trust -- Capital Gains Exemption (Canada)

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In this website, the question of "what type of trust do I need?" is addressed.  So you understand Trust Funds now, but don't know which type to choose?  Then this website will help you make an informed decision at a time you can do your own research, or take it one step further and seek professional assistance.
I chose this website because people need guidance on the topic of which type of Trust Fund to choose from.  There are various types with different purposes and strategies for execution.  From this reputable Canadian source, I found it useful that so many different types of Trust Funds are explained with examples to help in decision making.

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There are many types of trusts that are important to know about when planning your estate. Read about living, revocable, and irrevocable trusts.