Rights & Money

Testamentary Trusts: Valuable Planning Tools

By Olev Edur

According to Lydia Potocnik, head of estate planning and philanthropic advisory services at BMO Private Wealth in Toronto, testamentary trusts can be valuable planning tools for someone considering how to pass on family wealth.

  1. “First, trusts can provide for a minor beneficiary or a vulnerable individual, such as one with mental disabilities,” Potocnik says. “Or it may be that the intended beneficiary is a spendthrift—this is one of the most common reasons for a trust.” In addition, trusts can be used to protect against any creditors who may come after the beneficiary’s assets.
  2.  “Trusts can also be very valuable in blended-family situations, which we are now seeing more and more often,” Potocnik says. “For example, a trust could provide income for a second spouse, and when the spouse passes on, the capital ends up in the hands of the children from the first marriage.”
  3. Finally, Potocnik says, “a trust can enable business owners to defer or even eliminate taxation through what’s known as an estate freeze, whereby future growth passes into a child’s hands. This can be combined with a family trust to control when and how much goes to the next generation.”