COMMON TYPES OF TRUST (November 25, 2020)
Trusts are a legal means of holding such gifts of money or property by one person (the “Trustee”) for the benefit of another (the “Beneficiary”). The “Settlor” is the person who is sets up the trust. Trusts can either be Testamentary, which is contingent on the death of the person creating the trust, or Inter vivos, a living trust.
There are numerous kinds of trusts that exist for personal or business needs, but here are a few of the most common that you may experience:
When creating a will, our intent is to dispose of our assets and property, usually to our family or other persons, in which we create a Testamentary Trust. The testamentary trust will be activated upon the death of the Testator, typically with preconditions that must be satisfied.
A Spendthrift Trust (which can exist in both inter vivos and testamentary trusts) is a trust that appoints a Trustee to manage a gift to a Beneficiary until that Beneficiary reaches a certain age, typically 18 or 21 years of age. This protects the inheritance from being spent frivolously.
A Henson Trust is created to protect a Beneficiary who is receiving government assistance under the Ontario Disability Support Program (ODSP). This type of trust came into existence by Ontario case law (re: The Minister of Community and Social Services v Henson,  OJ No 1121, aff’d  OJ No 2093 (Ont CA)), in which the court ruled that a trust for a disabled Beneficiary would not result in them losing access to government benefits.
A Spousal or Common-Law Partner Trust (which can exist in both inter vivos and testamentary trusts) are to benefit spouses who want to ensure that their spouse is entitled to receive all of income or capital of the trust during their lifetime. There are also some tax benefits that the spouse may receive.
An Alter-Ego Trust is a type of inter vivos trust for Settlors who are 65 years of age or older. This trust is for tax benefits, which allows the Settlor to receive all the income or capital of the trust while they are alive.
For any trust to be valid, there are three certainties that must exist:
- Certainty of Words or Intention – the trust is to be clear that the Settlor intended for the Trustee to give away the assets of the trust to the Beneficiaries;
- Certainty of Subject Matter – exactly what it is that is being held in trust, and the amount to be distributed to the Beneficiaries; and
- Certainty of Purpose or Objects – who the Beneficiaries for certain are.
For all your legal inquiries, Arkadiusz J. Empel and his trained legal professionals at Empel Law are here for your convenience. Give us a call at 416-500-1937.