What is it ?
You have heard the expression " Family Trust " without knowing exactly what it is?
Let’s see how we can explain this concept:
- A child or another parent is affected by a physical or mental handicap which will probably prevent him or her to work or fill its needs;
- You wish to have your assets or part thereof seizure proof or protected in case of bankruptcy;
- Your heirs or legatees are not old of mature enough to manage the capital that you want to bequeath to them;
- In those three cases (among others) the Civil Code of Quebec proposes a practical and efficient tool which is called a “trust”.
The legal document creating a Trust provides for different participants:
- The Settlor: it is the person who transfers funds or other assets to constitute the patrimony of the Trust; at any time, other funds or assets may be added to the Trust patrimony;
- The Trustee(s): the persons who receive the patrimony and manage it;
- The Beneficiary(ies): the person(s) who will receive the benefit of the income of the Trust, like children, other parents etc.
The Settlor or the Beneficiary(ies) can act as Trustee(s) as long as there is another Trustee who is neither a Settlor nor a Beneficiary.
Advantages: The Trust creates a distinct and separate patrimony to which the creditors of the Trustee or a Beneficiary.
Constitution: A Trust is constituted by means of a Deed under private signature which does not have to be registered or otherwise published, except in some cases. The document, generally quite extensive, contains provisions contemplating various possibilities like the death, the revocation or resignation of the Trustee.
Cost: The services of a qualified jurist must be retained to prepare the structure of a Trust. Depending on the complexity of the matter, the fees can vary from $3,000 to $15,000.
Tax treatment: A trust is taxed at a rate of approximately 50%. However, if income is given to the Beneficiary, the amounts so given do not form part of the assets taxed in the hands of the Trustee. A Trust is a follow through, tax wise.
Who may use it? A Trust is a solution to various problems. It is available of any person who wants to constitute a separate patrimony of $50,000 or more.
The partners of Boverry have experience in the constitution of Trusts and can counsel you in this regard.
The foregoing information is provided for the benefit of those consulting the Web site of BOVERRY, ATTORNEYS. It shall not be considered as a legal opinion in respect of particular circumstances.