In Wills & Estates

Creating a comprehensive estate plan is important for safeguarding your family’s future. As you work with a ‘trust attorney near me’ in Surrey, one must understand which assets should be funded into your trust.

Estate planning lawyers and law firms provide legal services to help you manage and avoid probate to ensure proper estate administration. By funding your trust correctly, you can protect significant assets, streamline the estate administration process, and reduce potential probate fees. 

Inter Vivos or Testamentary Trusts?

There are essentially two types of trusts. Testamentary trusts are created within a will and become effective upon the testator’s (will-maker) death. Recent changes to Canadian law have removed the tax benefits of long-term testamentary estate trusts.

Any other trust, such as those employing an estate freeze, is a living or inter-vivos trust established while the creator is still alive. Living trusts serve various purposes, with the Canada Revenue Agency (CRA) recognizing 31 different types for a range of beneficiaries. Some of these include:

  • Alter ego trust
  • Employee trust
  • Master trust
  • Real estate investment trust

Asset That Goes Into Trusts & What to Do About It

Real Estate

For a smooth transfer of real property into a revocable trust, you must transfer the legal title to your trustee. According to real estate law, this requires an executed, notarized, and recorded deed that complies with all wills and estate law requirements.

Here are some key considerations when working with an estates lawyer to transfer real estate into your trust:

  1. Mortgage Considerations: Contact the mortgage company before initiating the transfer. Confirm they will grant written permission to add your trust as the other party.
  2. Due on Sale Clause: Determine if the transfer might affect any existing mortgage or deed of trust, specifically if it might trigger a “due on sale” clause. Estate lawyers can provide valuable legal services to navigate this.
  3. Insurance Policies: After transferring real estate titles, contact your title insurance company and homeowner’s insurance carrier to add your trust to those policies. This step ensures your estate plan is comprehensive and protects your assets effectively.

Consult with an estate lawyer or law firm to help you address these considerations and assist in the estate administration process to ensure your family’s estate and property are managed efficiently.

Bank Accounts

Before transferring an account or savings certificate into your trust, consult your bank first. There may be penalties for early withdrawal, and some banks may require you to open a new account rather than change the name on an existing one.

In either scenario, you’ll need to obtain a new passbook (and certificate, if applicable) issued in the name of your trustee (loved one or family member). Seek guidance from estate lawyers to navigate these steps smoothly and ensure compliance with legal requirements.

Investments (Stocks, Bonds, & Mutual Funds)

Yes, you can fund a trust with investments. To transfer corporate stocks, mutual fund shares, or bonds into your trust, consider these tips:

Certificates Stocks and mutual fund shares issued in certificate form must be registered in the trustee’s name. Contact the broker or issuer to arrange this change. 
Consolidation Multiple certificates for shares of the same corporation can be combined into a single new certificate in the trustee’s name for easier tax tracing
Street Name Holdings Stocks, bonds, or mutual fund shares held in the “street” name by a broker require updating the account to reflect trustee ownership. Provide a copy of the Trust Agreement as needed.
Bonds and Debentures Bonds issued by corporations or governments must be registered in the trustee’s name, with new certificates issued. Unregistered bonds can often be converted to registered form or transferred using a transfer document for bearer bonds.
New Purchases Any bonds bought after establishing the trust should be purchased in the trustee’s name, with important documents retained to prove ownership

Vehicles

Certain vehicles hold their value over time, making them valuable assets for transfer into a revocable living trust. Before proceeding with title transfers, consider potential taxes and seek advice from a trusted financial adviser or wills and estate lawyer to navigate the process effectively.

Business Interests

Funding a revocable living trust with your business interest offers significant benefits, including relieving your family from managing business debts and potentially reducing estate taxes. Here’s how different types of business ownership are affected:

Sole Proprietorships Transferring a sole proprietorship during probate can be challenging. However, holding business assets in trust provides protection for your family, similar to transferring personal assets.
Partnerships You can transfer your partnership share to a living trust but may need to update ownership certificates accordingly.
Limited Liability Companies (LLCs) LLC owners require approval from the majority of owners to transfer their interests to a living trust. Once transferred, voting rights remain with you while ownership shifts to the trust.

Valuable Personal Property (Artwork, Jewelry, Etc.)

You can transfer personal items in a trust, such as jewelry, art, collectibles, and furniture, including significant pieces like pianos. But you need to know these points:

  • Items without legal certificates or titles are usually listed in an accompanying schedule kept with your trust documents.
  • Assets with certificates or legal titles require the owner to transfer their ownership interest to the trust.

Assets like gold bullion, silver coins, and art objects present challenges due to their lack of clear registration or ownership proof. These can be managed using an instrument of assignment, similar to bearer bonds, or a Bill of Sale for no consideration.

It’s advisable to create a detailed inventory of these items, including photos and descriptions. If insured, ensure to transfer the insurance policy into the name of your trust to protect your estate planning interests effectively.

Intellectual Property

Alongside personal properties, certain assets such as royalties, copyrights, patents, and trademarks can also be transferred to a living trust. Include identification numbers where applicable and inform the relevant royalty company about the ownership transfer for these assets. This ensures proper probate and estate administration within your estate planning strategy.

Irrevocable Trust Fund Via Pour-Over Will

Establishing a pour-over will beforehand is a critical method of transferring remaining assets into a living trust upon the trustor’s (will-maker) death. Any assets not distributed through title, deed, or directly into the living trust will automatically “pour over” into the trust.

Assets unintentionally omitted from wills or unknown at the time of death, such as owed money or inherited properties, also transfer with a pour-over will (under the Wills Variation Act). One drawback is that a will must undergo probate, a time-consuming process that exposes that part of the estate to potential estate taxes.

Do not Fund a Trust With These Assets 

Retirement Assets

Transferring these to a trust can trigger income taxes and penalties. Instead, name your trust as the beneficiary to control distribution. 

Health Care Accounts

Health care accounts are tax-free assets that cannot be transferred to a trust. Like retirement assets, you should name your trust as the beneficiary for flexible distribution.

International Assets

Property or assets outside the country may not be transferable to a Canada-based trust. You better consult an estate planning lawyer in the country where the assets are located.

Vehicles

You can fund a trust with vehicles, except cars, boats, and motorcycles. However, some provinces allow vehicles to bypass probate in Canada if they meet specific criteria. Every day vehicles depreciate, and re-titling them in a trust can be cumbersome.

Cash

Physical cash cannot be placed in a trust. Instead, you may deposit the cash into a bank account and transfer the account to the trust.

 

trust attorney near me

 

Make Funding Easy with Estate Planning Lawyers

Carefully selecting which assets to fund into your trust is crucial for securing your family’s future and ensuring efficient estate administration. Working closely with wills and estate lawyers can help you navigate estate planning and probate fees (legal fees) while optimizing the protection of major or simple assets.

Estate lawyers provide invaluable legal services to guide you through any complex estate plan, including wills variation claims, trust litigation, power of attorney, and representation agreements. Whether you’re considering inter vivos or testamentary trusts, Surrey wills and estates lawyers can help you with your estate planning needs.

Our experienced team of attorneys at Sidhu Legal is here to assist clients in British Columbia with all their estate planning needs to guarantee your loved one or family members receive adequate provision and are well taken care of.

Frequently Asked Questions

How difficult is the funding process?

The funding process for a trust is not difficult but can be time-consuming. Here’s a summary:

  • Bank Accounts & Beneficiary Designations: Simple changes often require visiting the financial institution and signing paperwork.
  • Real Estate: Requires preparing and recording a new deed in county property records.
  • Other Assets: Personal property and certain business interests can be transferred using an assignment document.
  • Proof of Trust: Some entities may require a certificate of trust, prepared by an attorney, to verify the trust’s existence without revealing details about beneficiaries or assets.

Why is funding a trust important?

Funding your trust is necessary because:

  • Without funding, your assets won’t avoid probate.
  • Your trust and trustee can only control assets that are in the trust.
  • An unfunded trust doesn’t control anything, no matter how well it’s written.
  • To avoid probate and court involvement, you need to transfer your assets to the trust now.

What are the attribution rules in Canadian trusts?

In Canada, while a trust isn’t recognized as a separate legal entity, it’s taxed at the highest rates according to Canadian law. To manage tax implications, trustees often distribute trust income to beneficiaries (family members), who may face lower tax rates.

However, Canadian tax law aims to prevent tax avoidance through rules attributing trust income back to the person who transferred assets to the trust, especially if beneficiaries are close family relatives. As per the Succession Act, these attribution rules apply to spouses or minor children receiving dividend and interest income but not capital gains.

Exceptions exist for trusts like alter-ego trusts and joint ownership trusts. This tax framework influences estate planning strategies, prompting many to consider revocable trusts.

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