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Estate Planning for those 65+

Estate Planning for those 65+

Life-interest trusts Will, Estate Planning for 65+

When thinking about estate planning, most people think about the usual documents; wills, powers of attorney and representation agreements. However, Canadians over the age of 65 are eligible for two types of life-interest trusts. These trusts essentially act as a substitute for a Will and address some of the disadvantages of having a Will.

Two types of life-interest trusts:

1.Alter ego trust – created for the benefit of the settlor (trust-maker) alone, during his/her lifetime; and
2.Joint spousal trust – very similar to the alter ego trust, except it is created for the benefit of the settlor and the settlor’s spouse, during both of their lifetimes.

Advantages:

  1. Both trusts allow you to avoid the probate process, meaning you avoid paying probate tax;
  2. You can avoid the compulsory estate planning laws and succession schemes (you are able to leave your estate to anyone you want in any proportion);
  3. These trusts cannot be challenged like Wills can under WESA, therefore, allowing you to avoid potential Will variation claims
  4. Asset protection from creditors; and
  5. Avoiding Powers of Attorney.
  6. Beneficiaries can receive their inheritance with less delay
  7. Professional fees are reduced

Disadvantages:

  1. Tax returns will need to be filed;
  2. Income retained in the Trust will be taxed at the highest marginal rate

Requirements to set one up:

  1. Must be at least 65 years of age to settle and contribute capital property. For joint spousal trusts, both spouses must be over 65.
  2. Must be a Canadian resident
  3. Only the settlor/spouses are entitled to income from the trust during the lifetime of the settlor/spouses.

If you or someone you know is interested in estate planning services, or have any questions, feel free to leave a comment below or reach out and book a consultation.

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