A trust is a legal arrangement where one person (the trustee) holds and manages property or assets for the benefit of others (the beneficiaries). Trusts are a flexible and powerful tool in estate planning, allowing you to control how your assets are managed and distributed, both during your lifetime and after your passing.
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Trusts in British Columbia
Cunningham & Co. can assist you with establishing your trust. We provide expert guidance on the legal considerations involved, ensuring your trust meets your objectives and complies with BC law.
What is a trust?
Trusts are arrangements where legal ownership of assets is transferred to a trustee, who manages them for the benefit of designated beneficiaries. Trusts can be established during your lifetime (called inter vivos trusts) or take effect upon your death (called testamentary trusts), and they provide numerous benefits, including privacy, asset management, and protection against certain legal challenges.
Inter vivos trusts (living trusts)
An inter vivos trust, also called a living trust, is created while you are still alive. This type of trust allows you to manage your assets during your lifetime, including situations where you may become incapacitated. One of the primary benefits of a living trust is that it can help avoid or minimize probate, provide privacy, and protect against will variation claims. Additionally, living trusts may offer tax advantages, such as the potential use of capital gains exemptions if you are selling a business.
However, there are also some disadvantages to consider. Transferring real property into the name of the trustee may trigger taxes upfront, and there are ongoing trust administration fees. Tax rules for living trusts are complex. For example, they may be subject to deemed disposition every 21 years, and any income that is retained in the trust rather than distributed to beneficiaries could be taxed at the top marginal rate rather than the personal marginal rates of the beneficiaries. For this reason, it is highly recommended to obtain professional tax advice before establishing a living trust.
Living trusts are often suitable for individuals with minor children, high net worth or generational wealth, blended families at risk of will variation claims, family businesses, or beneficiaries who are incapable or not financially responsible. Common examples include family trusts, alter ego trusts, and spousal trusts.
Testamentary trusts
A testamentary trust is created in a will and only comes into effect upon your death. This type of trust allows you to control the distribution of your assets over time, rather than providing them in a lump sum immediately after death. Testamentary trusts are particularly useful for managing large inheritances, protecting minor or disabled beneficiaries, or ensuring that assets are used according to your wishes for incapable or financially irresponsible beneficiaries.
With a testamentary trust, you can decide how your assets should be managed, distributed, and utilized for your chosen beneficiaries. For example, you may specify that assets be distributed in installments, in a lump sum at a particular age, or delayed until certain conditions are met. You also decide who will serve as trustee, who the beneficiaries will be, and any specific instructions for how the trust property should be handled. The trustee has a fiduciary duty to act in the best interests of the beneficiaries and to follow your instructions closely. Often, the trustee is the same person as the executor for administrative ease, though this is not required.
Similar to living trusts, testamentary trusts have tax implications that require careful consideration. Tax advice is strongly recommended to ensure the trust operates efficiently. We can work with your tax professional.
Common uses of trusts in British Columbia
Trusts are versatile legal tools that can be used in a wide range of estate planning scenarios. In British Columbia, they are particularly valuable for protecting family wealth, managing assets for minors, and planning for incapacity. Many clients establish trusts to ensure their assets are managed and distributed according to their wishes while minimizing conflicts and tax consequences.
One of the most common uses is for family trusts in BC, which allow high-net-worth families to preserve generational wealth and provide ongoing financial support for beneficiaries. Family trusts can be structured to control the timing and amount of distributions, helping beneficiaries manage inheritances responsibly and avoid sudden access to large sums of money.
Living trusts for minors in BC are another frequent application. These trusts ensure that children receive assets according to the grantor’s instructions, often with distributions scheduled for specific ages or milestones. This can prevent disputes over minor inheritances and protect the assets until the child is capable of managing them responsibly.
Trusts are also commonly used in blended families to prevent potential conflicts between children from different relationships. Properly structured trusts can provide for stepchildren while ensuring that biological children’s inheritances are protected, reducing the risk of will variation claims.
For family businesses in BC, trusts are an effective way to manage and transfer ownership over time. Business owners can use trusts to maintain control during their lifetime, plan for succession, and minimize estate and probate costs. Trusts for business succession in BC can provide continuity and protect the interests of both the family and the company.
Trusts can also provide for incapable adults or beneficiaries who may not be financially responsible. By appointing a trusted trustee, grantors can ensure that assets are used appropriately for the care and support of the beneficiary, whether for daily living, medical care, or long-term financial stability.
Other common examples include alter ego trusts, spousal trusts, and testamentary trusts. Alter ego trusts are often used by seniors to manage assets during their lifetime and avoid probate, while spousal trusts can protect a surviving spouse and manage tax consequences. Testamentary trusts, created through a will, provide control over post-death distributions and can be tailored to specific needs, such as educational funding, healthcare needs, or staggered inheritance schedules.
In short, trusts in British Columbia are a flexible solution for clients seeking to protect their family, manage assets efficiently, minimize taxes, and ensure that their wishes are followed precisely. Working with a lawyer to draft your trust ensures that it is legally valid, tailored to your circumstances, and structured to achieve your estate planning goals.
Why choose Cunningham & Co. for trusts?
At Cunningham & Co., we provide customized, lawyer-drafted trusts tailored to your unique circumstances. Whether you are establishing a living trust to manage your assets during your lifetime or a testamentary trust to control distribution after death, we ensure that your wishes are legally enforceable and that your estate is protected.
We guide clients through selecting the right type of trust, structuring trusteeship and beneficiary arrangements, understanding legal implications and administrative responsibilities, and drafting clear and enforceable terms to prevent disputes. Every step of the process is designed to ensure that your assets are managed according to your intentions and that your beneficiaries are protected.
Book a free consultation today to discuss your situation, explore your trust options, and protect your assets and loved ones with a tailored trust solution.
