Trust

Trusts are generally created and operated for tax planning purposes. From the Canada Revenue Agency's perspective, there are two types of trusts, a testamentary trust or an inter vivos trust.

Testamentary trust
A testamentary trust is a personal trust or estate that is generally created on the day a person dies. The terms of the trust are generally established by a Will, or failing the existence of a valid Will, a court order.

Inter vivos trust
An inter vivos trust is any trust that is not a testamentary trust. Due to the creativity of lawyers and accountants, there are many types of inter vivos trusts, common ones being an Alter Ego Trust, a Master Trust and a Personal Trust.

Formal vs. informal trusts
Formal trusts are those trusts that have been created through legal documents and from a tax perspective operate as a separate entity. Many Canadians dealing with Canadian financial institutions on behalf of minor children create informal trusts (also known as in-trust accounts) with the financial institution, typically using the financial institutions paperwork to designate the account as an informal trust.