What a testamentary trust can do for you and your heirs
A testamentary trust offers a distinctly unique combination of benefits - it lets you potentially reduce tax for your heirs and maintain control of the assets beyond your lifetime.
In contrast to a living trust, which is set up during your life, a testamentary trust is created through your will and only takes effect upon your death. Just like a will, you can change the terms of such a trust at any time, as long as you remain of sound mind.
Testamentary trusts have a big tax benefit over living trusts. While income retained in living trusts is taxed at the highest marginal tax rate, income retained within a testamentary trust is subject to graduated tax brackets similar to those enjoyed by individuals. As a result, you may maximize assets left to your beneficiaries.
Control is the other benefit. Assets moved to a testamentary trust will be managed and distributed according to whatever instructions you put in your will. So, for example, you could provide more money to children who eventually pursue a post-secondary education. Or you could have trust income go to one set of beneficiaries with the capital going to another at a pre-set time or event. Legal advice is critical to ensure you get the results you want.
Speaking of control, you can prevent minor children from gaining access to an inheritance once they reach the age of majority. With proper planning, insurance proceeds could go directly to a testamentary trust, avoiding probate fees.
It's true that there are extra costs associated with trusts, including set-up, tax-preparation and annual trustee fees. But many people consider the added expense well worth it, given the assurance that their estate objectives will be met.
Call us for a review of your estate plan to see how you can increase peace of mind today with a testamentary trust.
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This Report is written by Investment Planning Counsel, a fully integrated Wealth Management Company. Mutual funds available through IPC Investment Corporation and IPC Securities Corporation. Securities available through IPC Securities Corporation, a member of CIPF. Insurance products available through IPC Estate Services Inc. Mortgage broker services provided by IPC Save Inc. (ON Lic. #10227).