can be a tax–effective way of providing for your dependents both while you
are living and after you die. When you create a trust, you are giving away
the assets in it. Any income or capital gains are taxed in the hands of
the trust or its beneficiary. Trusts are of two types — those that form
part of your will and come into effect when you die, and those that take
effect while you are alive.
Trusts set up under a will can be used in many different ways:
This type of trust may be suitable if your estate
is large or complicated and your spouse lacks the necessary expertise to
manage it. Spousal trusts can also be used to preserve the assets for your
children in the event that your spouse remarries.
Trusts for children under 18
Rather than having your children
receive their inheritance in a lump sum when they reach 18, you can space
it out over several years. You can also give the trustee discretion to
release funds in advance for a child’s schooling.
Trusts for dependents with special needs
Trusts can be set up to
provide lifetime income for dependents who are mentally or physically
handicapped.Living trusts can be put to effective use in a number of
This constitutes a private relationship: a trust
relationship is created when one person (the Settlor) transfers assets
(the Trust Fund) to another person (the International Trustee) who manages
the trust fund for the benefit of Beneficiaries. The Trust Deed (document
that creates the Trust) is not registered with any government authority,
but is held by the Offshore Trustee in strictest of confidence.
With a living trust, you can provide for your
current spouse during his or her lifetime, after which the money passes to
the children from your first marriage.
Supporting "boomerang" children, dependent parents, or children who are
mentally or physically handicapped
Rather than using after-tax
income to support adult children who return home, you can set up a living
trust, the income from which is taxed in their hands — at a lower tax
rate. The same strategy can be used to provide for dependent parents or
children with special needs.
Proprietors of family businesses can use a living
trust to freeze the value of the business for tax purposes. In effect, you
can pass the business on to your children while still maintaining some
control. Future capital gains will be taxed in the hands of your children.
Discreetly providing for someone special to you
wills are made public when you die, but living trusts remain confidential.
Providing for yourself
You may become too old or sick to manage
your own affairs. You can set up a trust to care for you and your spouse
during your lifetime with the remaining capital passing to your children
when you die.
MoneyWI$E Financial Inc. consulting fees are $250 per
hour for trust set-up, except for offshore trust, which is $5,000 and