There are many good reasons to set up a trust for a minor. Trusts are an important part of your life if you want to set something aside for your heirs and/ or children one day. If they have a trust, that means they will have money when they turn a certain age. However, one major downside of trusts is that it can be complicated to set one up. They take a lot of time to manage and oversee and can cost quite a bit of money. That aside, trust (no pun intended) us when we say you do have a good reason to go to the trouble of setting up a trust. Here are some advantages and goals of using trusts.
The best reason to set up a trust is to be able to make some money available to your children when they turn a certain age. They will be able to use this money for education, including tuition and living costs. Another good reason is to avoid taxes. A third is protecting your property and the property of your beneficiary. If you want to leave a lump sum to your only heir, but you are concerned about how he or she may spend it, then you can use a trust to determine how they do that. The trust can give them a little bit over a preset period of time and then one bigger sum at once when they turn a certain age, at which you can be sure they will spend the money reasonably. Whether you can ever be sure is another issue. If you don’t think you can, you can add terms to how the money in the trust is dispersed. For example, you can set it up in such a way that they get the lump sum upon achieving something you wanted them to achieve, such as graduating college, getting married, getting some kind of a job, or whatever.
Now we come to the specifics of establishing a trust in Canada. If you are over 65, you can transfer funds or other assets into special types of trusts. You do not pay taxes if you do this. This way, you can manage your assets and enjoy the income during your life cycle. After your death, your assets will be distributed to your beneficiaries. It is a good idea to set up a trust early on. If you put off setting up this trust until you are old and grey, you may be overlooking the sad possibility of falling victim to Alzheimer’s or another serious illness and not making the best possible judgment. You may think your own flesh and blood would never betray you this way, stooping so low as to take advantage of your unenviable position, but you may be wrong. This is why, you should set up a trust when you are still relatively young, able-bodied, and of sound mind.
One option is a testamentary trust. This refers to a trust in a will, which comes into force upon death. These trusts also offer some income tax benefits to Canadians. In order to take advantage of these benefits, however, you need to follow certain income tax rules.