Testamentary trust

Testamentary trusts are stipulated in the will and are created upon the testator's (the person making the will) death. In accordance with your will, property is turned over to a trustee who manages it according to your instructions in the best interest of the beneficiaries. A trust company is the only legal entity authorized to do this.

As testator, you determine the duration and terms of the testamentary trust.

Why a testamentary trust?

Setting up a testamentary trust for cash and assets (stocks, mutual fund shares, property) can help defer and reduce estate taxes while protecting your estate.

From a tax standpoint, assets left in trust constitute an estate separate from the estate of the beneficiaries. This means the trust is considered a separate taxpayer and must produce its own separate tax return. The resulting income splitting is advantageous for the beneficiaries because it allows them to benefit from graduated tax rates only available to individuals.

There are also other reasons to set up a testamentary trust:

• To provide for your spouse while protecting the capital that will go to your children upon his or her death.
• To manage the assets of minor beneficiaries.
• To release trust income or assets to children gradually over time.
• To ensure assets are soundly managed by skilled trustees.
• To preserve and transfer important family assets from generation to generation by allowing beneficiaries to inherit the use of the property rather than the property itself.
• To allow children from a prior marriage to inherit your estate upon the death of your spouse.