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Sept. 19, 2012 /CNW/ - While a recent CIBC poll found 55 per cent of Canadians have a will in place, few have included trusts as part of their estate plan - vehicles that could potentially save them tens of thousands in taxes and speed up the transfer of assets.
Jamie Golombek, Managing Director, Tax and Estate Planning, CIBC Private Wealth Management notes that a trust is essentially a vehicle that allows a person to give assets to someone else (known as a "beneficiary"), but under certain terms and conditions, such as when funds can be spent and on what. The added benefit of a trust is that, for tax purposes, it is treated as a separate individual which may reduce taxes paid.
"Trusts are a valuable part of an estate plan to direct your money to the person intended, when intended, and for the purpose intended," he says. "For example, you can indicate in the trust document that the money in trust should be used to pay for school tuition and not to buy a sports car."
Two new reports on the benefits of including trusts in estate plans provide a number of reasons why people should consider trusts as part of an overall financial plan. Among those reasons are:
Pay less tax - a trust can save an individual up to $18,000 in tax annually compared to the individual personally owning the property held in a trust.
Decide how inheritance is spent - a trust can set out that an inheritance is to be spent wisely, such as for university tuition and not on something else.
Help loved ones get their money sooner - certain types of trusts can provide for a quicker transfer of assets on death since, unlike wills, trusts are not subject to the public probate process.
"While the rules for trusts can be complex, they can save you thousands of dollars every year while you are alive and ease the tax burden on your estate after your death. The single largest mistake in estate planning is failing to implement plans early enough," says Mr. Golombek. "Even among those who have included trusts in their estate plans, people assume it is most beneficial to transfer assets into a trust upon death. But in fact, it doesn't always make sense to wait until the end of life to transfer all of your assets. It can be a big mistake to overlook the benefits certain trusts can offer when assets are transferred during individual's lifetime."