Trust

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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[1].

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.

See also

References

  1. Canada Revenue Agency, Types of trusts, viewed November 3, 2013.

Further reading

External links