Protect Your Loved Ones with Inter Vivos Trusts

September 6, 2017

 

Trusts created during your lifetime, called “inter vivos trusts,” have a natural link to estate planning. They are a means of settling assets today, while at the same time considering the consequences of your death. In contrast, “testamentary trusts” are designed to take effect after your death.

People create inter vivos trusts for a variety of reasons, but two of the most common are tax efficiency and personal needs. Because the trust can potentially reduce the probate tax and executor1 fees associated with a traditional will, the total value of your legacy may be significantly enhanced. And, since you are able to specify how and when your beneficiaries will receive their inheritance, you can ensure that your wealth continues to be responsibly managed beyond your lifetime.

Work with a trust advisor

An estate and trust advisor can provide you with clear, objective information about your options. For instance, working in collaboration with your MD Advisor, he or she will explain how an inter vivos trust can help create continuous, multi-generational financial security. And, by appointing MD Private Trust as your professional trustee, you can be sure that experienced and caring professionals will always be there for you and your family, working in your best interests.

Inter vivos trust strategies

Whether you require an alter ego (for one person), a joint partner (for a couple) or a family trust, your estate and trust advisor will help you implement an inter vivos trust strategy that suits your objectives. These may include:

  • Incapacity planning: Provide for your own care in the event of illness or injury and ensure that your loved ones are always cared for.
  • Simplification of your estate: Allow for a quicker transfer of assets to your beneficiaries.
  • Minimizing probate tax and executor fees: Potentially save on probate tax and executor fees, since assets in a trust are not transferred under the terms of the will.2
  • Creditor protection: Structure the trust to help protect your assets.
  • Income splitting: Use the trust as an income-splitting tool (depending on the type of trust settled).
  • Privacy and confidentiality: Keep the distribution of assets from the public record.

Greater financial security during life—Case study

Dr. Sharma’s3 76-year-old wife is starting to show signs of early-stage Alzheimer’s. The Sharmas’ only daughter lives outside the province, and Dr. Sharma is concerned that if something were to happen to him, his wife would not be properly looked after.

Dr. Sharma’s MD Advisor recommended transferring $1.5 million from a non-registered investment account into a joint partner trust, a type of inter vivos trust, with MD Private Trust as his co-trustee and MD Private Investment Counsel as his portfolio manager.

During his lifetime, Dr. Sharma can use the funds to care for himself and his wife. However, if he becomes incapacitated or dies before his wife, MD Private Trust will continue to carefully manage the trust assets. They will also work with the Sharmas’ attorney for personal care to ensure that the assets are used to provide Mrs. Sharma with proper accommodation and supplementary health care for the rest of her life.

Providing a stronger legacy for the future

Assuming the trust still holds $1 million when both Dr. and Mrs.  Sharma have passed away, the trust will provide several advantages over a conventional will, including:

CONTROL

The trust’s assets can be distributed according to the Sharmas’ wishes, such as providing annual income to their daughter and funding university for their grandchildren.

SAVINGS

The trust can avoid executor fees and probate tax, plus potential delays in the court system.

PRIVACY

The details of the trust will never become a matter of public record.

PROTECTION

The trust provides protection from common estate planning risks, such as mismanagement by an executor or a contested will.

 

Learn more about MD's estate and trust offering or contact an MD Advisor to find out how we can help.

 

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