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Learning Objective # 4 Appraise various types of trusts and estates.

LO#4. Learning Objective # 4 Appraise various types of trusts and estates. LO#4. What is a Trust?. A trust is a legal arrangement through which a trustee holds your assets for your benefit or that of your beneficiaries Settlor (grantor) is creator of the trust

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Learning Objective # 4 Appraise various types of trusts and estates.

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  1. LO#4 Learning Objective # 4Appraise various types of trusts and estates.

  2. LO#4 What is a Trust? • A trust is a legal arrangement through which a trustee holds your assets for your benefit or that of your beneficiaries • Settlor (grantor) is creator of the trust • All trust assets added together are known as an estate • Benefits of trusts: Reduce estate taxes, avoid probate, free you from managing assets, and provide income for a surviving spouse, ensure property serves a desired purpose after your death

  3. LO#4 Types of Trusts • Living (Inter Vivos) Trust • is created and provides benefits while you are alive • Testamentary Trust • established by the creator’s will that becomes effective on death • Spousal Trust • all income from trust must be paid during spouse’s lifetime • capital cannot be distributed to anyone else during spouse’s lifetime

  4. LO#4 Pros and Cons of a Trust Pros Cons • Renders need to probate redundant • More private • Easier to change terms • Trustee has authority to manage assets in event you become disabled • Must be properly funded • Cost of an attorney to set up trust is higher than a will • Still need a last will & testament • Longer time allowed for contesting a trust

  5. LO#44 Make an Inventory of Your Estate • Cash, bank accounts, GIC’s, money market funds • Stocks, bonds and mutual funds • Life insurance, employee benefits and annuities • Your home and any other real estate • Business and farm interests • Corporate interests, partnerships • Interests and trusts • Antiques, art, collections, cars

  6. LO#4 Estate Assets not Distributed by A Will • Life insurance, annuities and RRSP’s go directly to the named beneficiary • Assets held in joint tenancy • confers rights of survivorship • Life insurance and employee benefits • free of income tax • excluded from probate • Lifetime gifts and trusts

  7. LO#4 Settling Your Estate • If you have a will the executor will carry out your wishes • Probate and Administrative Costs • fees for attorneys, accountants, appraisers, executors and administrators (3-5%) • probate costs rise with size of estate • If you die intestate your estate is distributed according to provincial law • Under control of court-appointed administrator

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