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Living or intervivos trust

This type of trust goes into effect while the trustor (the person who sets it up) is still alive and may remain in effect after he or she dies.

Maximum tax rates and Income Tax Act attribution rules apply. When it follows an estate freeze, living trusts allow income taxes on stock gains to be deferred.

Why a living trust?

In the case of privately-held companies, living trusts can be used to:

• Hold company shares during an estate freeze.
• Finance a buy/sell agreement when a shareholder dies.
• Turn over company shares to designated beneficiaries in case no one is found to take over the business.
• Keep confidential company investments.

They can also be used to:

• Maintain control over assets when a business owner is not yet ready to turn over control of the business to a major child.
• Protect assets from being seized by an heir's creditors.