Académique Documents
Professionnel Documents
Culture Documents
Trusts
Prepared by
Kristie Dewald
University of Alberta
Electronic Presentations in Microsoft PowerPoint
Trusts
I.
II.
III.
IV.
Beneficiary
Trust
Settler
Assets
3
A. Definition of a Trust
Trust does not have status of a legal person
Format closer to a partnership
Existence is created by trust documents
Outline the obligations of the trust
B. Types of Trusts
Two types:
Inter Vivos
In Lifetime
Commercial
Purchased
Testamentary
On Death
Personal
Not Purchased
5
B. Types of Trusts
Personal:
Used for estate and tax planning purposes
Includes inter vivos and testamentary trusts
Beneficiaries do not purchase trust interests
Receive trust interests from goodwill of others, typically a parent or
spouse
Commercial:
Beneficiaries purchase their trust interests
Typically, traded on the stock exchange
Examples include mutual funds, REITs and royalty trusts
10
11
13
C. 21 Year Rule
Trust have limited life:
Deemed to sell assets on its 21st anniversary.
Means assets deemed sold at FMV, includes:
Capital property
Depreciable property
Land that is inventory
Resource Property
14
C. 21 Year Rule
May be able to avoid deemed disposition at FMV if:
Transfer property to beneficiaries prior to 21 year anniversary,
Beneficiaries take over tax position of assets received
15
Settlor
Occurs at
FMV
Trust
Depends on
Type of Beneficiary
Beneficiary
16
17
E. Spousal Trusts
Spousal trust
Spouse is entitled to receive all the income and
No other person can use or receive the capital of the trust until
spouses death
18
E. Spousal Trusts
Three unique features:
Property transferred into trust at cost.
21 year rule is waived for the first 21 year anniversary.
Upon death of spouse assets are deemed to be disposed of
at FMV
19
F. Estates
The administrative period between debt settlement
and asset distribution
Estate life is limited last until executor duties are
fulfilled.
Death of
Individual
Estate Period
Assets collected
Debts settled
Assets To
Individuals
END
Assets To
Testamentary
Trust
On
Going
20
G. Other Trusts
Tax Deferred Income Trust Plans:
G. Other Trusts
Bare Trusts:
Purpose is to hold property on behalf of others
Unit Investment Trusts:
Mutual Funds
REIT
Income trust
Royalty Trust
22
Subscribe for
Common shares
23
24
25
26
27
28
Trust
Loan to
OpCo
Interest
To Trust
Operating
Company
29
30
31
32