Once you have decided to establish a family trust, the next question to consider is what type of trust you want. There are three types of trust, each serving a slightly different purpose. Which one you choose will depend on what you plan to do with your trust. Your wealth advisor will be able to help you decide what is best. Here is a quick guide to the three kinds of trust.
A revocable trust is generally set up so that wealth can be managed for the benefit of the settlor/grantor. The grantor retains certain rights over the trust during their lifetime. These include the right to instruct the trustee to distribute all or any portion of the trust property, as the grantor desires, and the right to change or revoke the trust at any time. The main characteristic of this type of trust is its flexibility and the power it gives the grantor to make changes to it during their lifetime.
In contrast to revocable trusts, irrevocable trusts do not allow any adjustments or changes once they have been drawn up. The grantor is not normally a trustee and does not retain any rights over the trust. The trustees have to manage the trust strictly according to the terms established in the trust agreement.
Revocable and irrevocable trusts are two varieties of inter-vivos trusts – i.e. trusts established while the grantor is still alive. Testamentary trusts are drawn up in accordance with the stipulations of the grantor’s last will and testament, which means they come into effect only after the grantor has passed away. The trustees then manage the late grantor’s estate in accordance with the requirements set out in the will.
Nour Private Wealth (NPW) is a Canadian company with an elite team of wealth advisors servicing clients across seven provinces. We are committed to helping high net-worth families and individuals manage their wealth, grow their assets and plan their estates for a tax-efficient transfer. Contact us today for more information on setting up a family trust and what is required to get the process underway.