Trusts are most often designed for the benefit of children, to protect them in the event of the death of parents or guardians. These are called testamentary trusts, and they don’t come into effect until they are activated by a death. Testamentary trusts need to be properly planned and drafted well in advance by an experienced trusts lawyer, like your Legal Sherpa® from Yeti Law. A testamentary trust is an excellent tool for protecting your loved ones in the event that you are no longer able to do so.
Why Create a Family Trust?
Trusts, at their most basic, are legal arrangements set up by one person to benefit another. There are three people, or parties, making up the arrangement: the first person (the settlor), transfers property to another (the trustee), for the benefit of a third (the beneficiary). There are a number of reasons to use a trust, such as:
- Trusts offer great flexibility: a variety of different types of assets may be placed in trust
- Trusts offer great privacy: a trust does not need to be registered and becomes valid as soon as it is signed
- Tax saving opportunities
- Creditor protection
- An excellent way to provide for the children of a previous marriage
Designing a Family Trust: Using the “Family Worksheet” to Create the “People Plan”
The Family Worksheet is a charting tool, unique to Yeti Law, which allows your Legal Sherpa® to visualize and better understand family relationships. The Family Worksheet allows us to prepare a People Plan of the individuals who are the most suitable agents to administer the trust. Both our clients and our Legal Sherpas® have found the Family Worksheets and People Plan to be invaluable tools.
Trustees should be people who are trusted enough to make decisions on behalf of children, otherwise they may be assigned to the care of an agent whom you would not necessarily have selected. It is important to give discretion over funds to a trusted agent whose beliefs and values line up with your family values. Trustees should also be chosen who are willing and able to act as trustees when the time comes, and the trust should be planned to accommodate for the possibility that trustees may not be able or available to act.
Trusts can be powerful tools, but there are certainly pitfalls that come from improperly designed or poorly drafted trusts. For this reason, when designing a trust, it is very important to reach out to an experienced and knowledgeable trusts lawyer, like the team at Yeti Law.
Inter-vivos and Living Trusts
In addition to testamentary trusts, there are a number of other equally useful types of trusts. Inter-vivo trusts, or living trusts, can also be used to protect assets and take advantage of tax benefits, but are not hinged on the death of the settlor. This type of trust makes use of a trust’s ability to transfer ownership of assets to others. Trusts of this type can also be highly flexible, and may be useful for income splitting and estate freezes. Living trusts can also be used to set up charitable donations or in providing for someone with special needs. Speak to your Legal Sherpa® about living trusts and other types of trusts that may be available to you.
