Are some of your heirs more vulnerable than others?
If Frank's parents had written their wills while their son was out wreaking havoc in a street gang and abusing a wide variety of illegal substances, they would undoubtedly have thought twice about leaving him half their assets.
The idea that money accumulated throughout a lifetime is quickly squandered by an heir is not a pleasant prospect. And it is natural to be concerned about what will become of a disabled child once we die, even if a substantial sum of money from our savings or life insurance has been set aside for him or her.
Sometimes, it is not enough to prepare a will and plan who will inherit your hard-earned wealth. Some situations may not be cut and dried when you put your final wishes into writing: one or more of your children may not have finished their studies or may have had a hard time establishing an independent life as an adult; a spouse may have put an exciting career on hold to look after the family; another family member may have been taking a prolonged trip around the world.
The destinies of siblings with the same parents sometimes differ greatly, even if they have all benefited from the same environment and chances for “success.”
There is, however, a tool for controlling the use, management and eventual distribution of assets: the testamentary trust.
Instructions for later
The testamentary trust makes it possible to give instructions during your lifetime for the money that will be bequeathed upon your death to one or more people. With this type of instrument, wealth is no longer given directly to heirs, but rather to a trust. For example, the trust can pay an income to the surviving spouse until his or her death, at which time the residual capital will be shared among the children. The trust can also be used to pay the children's tuition fees until a predetermined age.
All you need to create this kind of trust is a simple clause included in the notarial will.
However, the will must identify an administrator, called a trustee, to manage this trust. The trustee must be chosen with as much care as the liquidator of a succession.
The testamentary trust makes it possible to give instructions, during your lifetime, for the money bequeathed upon your death to one or more people.
An indirect yet significant benefit of setting up a trust is that it reduces the amount of tax paid on the money bequeathed to heirs. Such trusts offer a number of major tax advantages, two of which involve splitting income from the succession between the trust and the next of kin, and staggering capital payments over time.
This is by no means a tool exclusively for the well-to-do. Contrary to popular belief, the testamentary trust is for everyone, regardless of wealth, and can be adapted to various personal situations.
The notary's role
The notary is an expert when it comes to protecting wealth. The testamentary trust is a way of extending the protection of your wealth to the benefit of your loved ones.
Notaries are very familiar with the testamentary trust. They can advise their clients about its suitability and, if necessary, help them set it up and select a trustee. This part of the work includes delineating the trustee's powers and duties.
The notary also has the expertise to suggest advantageous tax and estate planning measures allowed under a testamentary trust. If, at first these strategies seem incomprehensible, rest assured that the notary is thoroughly acquainted with them and with tax laws.