Overview of Trusts
A trust in wills and estate planning is a mechanism that allows a person – known as the settlor – to provide property to another person – the trustee – for the gain of a beneficiary. Thus, the property is entrusted and administered by the trustee as a method of settling property.
For a trust to be legally valid, the following three characteristics must be present:
- Certainty of Intention – the settlor must intent to create a trust
- Certainty of Subject Matter – there must be property conferred upon the trustee
- Certainty of Objects – the beneficiaries of the trust must be explicitly ascertained
Therefore, a valid trust must outline the settlor, the property, the trustee, and beneficial owners.
As well, it is important to note that trusts are not revocable. The property cannot revert to the settlor unless specifically suggested within the trust document.
There are two types of trusts:
- Inter Vivos
This trust is established during an individual’s lifetime, with the purpose of transferring the benefit of assets to the trust’s beneficiaries. A trust’s terms will impose restrictions over the assets; with the gaining of the assets occurring once the stated conditions have been met.
Examples of inter vivos trusts:
- Employee Life and Health Trust (ELHT)
- Insurance Segregated Fund Trust
- Registered Retirement Savings (RRSP) Trust
- Tax-Free Savings Account (TFSA) Trust
- Testamentary
This trust is created as a consequence of death of the settlor. The appointed trustee manages the assets of this trust under the guidelines of the particular trust provision.
Examples of testamentary trusts:
- Lifetime Benefit Trust
- Qualified Disability Trust (QDT)
- Graduated Rate Estate (GRE)
- Spousal or Common-Law Partner Trust
Duties of Trusties
With respect to administration of a trust, trustees are given certain powers to act. In order to possess the legal power to act, a trustee must follow these central duties:
- Duty of loyalty to the beneficiaries – trustees must act solely for the best interest and benefit of the beneficiaries.
- Duty of reasonable care – trustees must conduct business of the trust in a proper manner, in the same manner they were to conduct their own business
- Duty to act with an even hand – trustees cannot favour one beneficiary over another
- Duty to act personally – trustees must not delegate their powers to others
How Can We Help?
At 6ix Estates LLP, we will work with you directly to structure your estate plan by drafting your Will and assisting with any estate administration applications with or without a Will. Contact us today at for a free 30-minute, no obligation consultation.