Estate Planning – Trusts and Wills

We get a lot of questions regarding the estate planning process. Some common factors to note in the planning process include:

·       Creating a will

·       Creating a trust

·       Considering gifting

Creating a will is an important step in an individual’s estate planning process. If an individual passes away without a will, it becomes an intestate, in which assets become frozen and are distributed by the government or courts. Creating a will allows an individual to ensure their assets are distributed appropriately after death. Expenses to be considered upon death include funeral expenses, payment of outstanding debts, and probate fees. Probate is the process of verifying the will and validating the executor.

In Alberta, assets such as real estate held in the estate may be subject to probate fees when an individual passes away. In this case, gifting your assets or creating a trust can be established to avoid these probate fees. 

There are several types of trusts that can be created:

1.       A testamentary trust arises upon the death of a person. However, if you would like to create a trust during your lifetime, there is an option to create an inter-vivos trust.

2.       The advantage of creating an inter-vivos trust is to allow the separation of control of an asset from its ownership. When an inter-vivos trust is created, the individual is able to transfer ownership of assets into the trust to beneficiaries (such as children) without actually having to pass the control of the assets yet. This type of trust may be beneficial from a tax perspective. The process of creating a trust includes providing a legal trust agreement, applying for a trust number, and filing annual returns. Note that a trust is different from a personal tax return as a trust cannot claim personal tax credits and are subject to different tax rates should there be taxable sources of income. Contact our office to see if creating an inter-vivos trust is the right choice for you.