Testamentary Trust - Calgary Trust Lawyer
Neufeld Legal P.C. can be reached by telephone at 403-400-4092 or email Chris@NeufeldLegal.com
An irrevocable trust is a legal arrangement where the creator of the trust (known as the grantor or settlor) permanently transfers assets into the trust, giving up all ownership and control over those assets.
Once established, an irrevocable trust generally cannot be changed, amended, or revoked without the consent of all beneficiaries, and sometimes a court order.
The key characteristics associated with an irrevocable trust, and the primary reasons that lawyers advocate for their use, includes:
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Permanent Transfer of Ownership: When assets are placed into an irrevocable trust, they are no longer legally owned by the grantor. The trust itself becomes the owner of the assets.
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Loss of Control: The grantor gives up the ability to manage, sell, or take back the assets in the trust. A designated trustee (who cannot typically be the grantor if asset protection is the goal) manages the assets according to the terms outlined in the trust document.
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Difficulty to Change: The "irrevocable" in the name means it's extremely difficult to alter or terminate the trust. Any changes typically require the agreement of all beneficiaries and, in some cases, court approval.
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Separate Legal Entity: For tax purposes, an irrevocable trust tends to be treated as its own separate legal entity with its own tax identification number.
Given these particular characteristics associated with an irrevocable trust, the benefits that are attainable include:
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Tax Minimization: By removing assets from the grantor's taxable estate, an irrevocable trust can significantly reduce or eliminate federal, state and provincial taxes upon the grantor's death. This is particularly beneficial for individuals with substantial wealth. In certain jurisdictions, where probate and/or property transfer taxes can be substantial, these costs might be avoided or substantially mitigated.
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Asset Protection: Since the grantor no longer owns the assets in an irrevocable trust, assets may be capable of protection against creditors, as well as divorce, depending upon the particulars of their structuring.
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Less common, highly particularized results achievable with irrevocable trusts can involve charitable arrangements; protecting government funding to recipients of medical support, in particular special needs beneficiaries; and protecting against spendthrift beneficiaries recklessly spending away their inheritance.
As one can naturally perceive, the main disadvantage of an irrevocable trust is the loss of control over the assets. Once assets are in the trust, the grantor cannot simply take them back if their financial situation changes or they change their mind about the beneficiaries. This lack of flexibility is why it's crucial to consult with an experienced estate planning lawyer to determine if an irrevocable trust is the right tool for your specific circumstances.
Irrevocable trusts are a powerful, yet complex, legal tool for individuals seeking to proactively protect and optimize their wealth for the future. They invariably require careful planning and professional guidance to ensure that they are legally sound and effectively meet their intended purpose and requirements of all pertinent laws .
Contact our law firm today to learn how our legal team can help you plan for the future or deal with the legal demands associated with the passing of a loved one. Contact our law firm at 403-400-4092 or via email at Chris@NeufeldLegal.com to schedule a confidential initial consultation.
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Henson Trusts. A Henson Trust is a trust (most frequently forming part of a parent's or grandparent's Will) that provides the trustees with the absolute discretion to distribute income and capital from the trust to the beneficiary as they see fit. The trustees have full control as to when, if and how much income or capital is to be paid to the beneficiary. Read more. |
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Inter Vivos Trusts. An inter vivos trust (also known as a living trust) is a legal arrangement created and funded during the lifetime of the settlor (the person creating the trust). The term "inter vivos" comes from the Latin "between the living" and as such is distinguishable from a testamentary trust, which is established on the death of the settlor. Read more. |
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Testamentary Trusts. A testamentary trust is a trust that is created by a person's will and comes into effect only upon their death. It is an alternative to distributing all assets directly to beneficiaries. Instead, assets are transferred to the trust, which is then managed by a trustee for the benefit of the designated beneficiaries. Read more. |
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Irrevocable Trusts. An irrevocable trust is a legal arrangement where the creator of the trust (known as the grantor or settlor) permanently transfers assets into the trust, giving up all ownership and control over those assets. Once established, an irrevocable trust generally cannot be changed, amended, or revoked without the consent of all beneficiaries, and sometimes a court order. Read more. |
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Asset Protection Trusts. An Asset Protection Trust is a legal arrangement designed to safeguard an individual's assets from potential future claims by creditors, lawsuits, or judgments. The core principle behind an asset protection trust is to legally separate ownership of assets from the individual who created the trust, making those assets less accessible to outside parties. Read more. |
IMPORTANT NOTE: This website is designed for general informational purposes. The site is not designed to answer specific questions about your individual situation or entitlement. Do not rely upon the information provided on this website as legal advice in respect of your individual situation nor use it as substitute for individual legal advice. If you want specific legal advice, you need to engage a lawyer under established legal engagement procedures that have been specifically agreed to by that lawyer.