Trusts 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:

Spousal trusts
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 situations including.

Offshore Trusts
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.

Second marriages
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.

Estate freezes
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
Bequests in 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 up.

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