Separate Trusts in Your Will for Each of Your Children: Do You Still Need Them?

When we do estate planning for clients with significant value in their estates, we often created spousal trusts for their spouse and separate trusts for each child.  This used to be advantageous from a tax standpoint, as each trust was taxed as a separate taxpayer, so each trust had the benefit of graduated marginal rates on income earned and left in the trust.  This benefit ended a few years ago when tax laws were changed to make income earned in most trusts taxed at the highest marginal rate.

If the sole purpose of the separate trusts in your will was the income splitting that was available from the former tax laws, the need for the separate trusts is now gone.  Simplifying your will to remove the separate trusts can be an advantage for ease of administration and reduced professional costs when you pass.

However, there can be other uses for separate trusts in your will, such as protection from creditors or partners, or for protection of the assets for a child who cannot handle money well.

If the trustee of the trust is a person or entity other than your child, and the beneficiaries of the trust include your child and their children or other beneficiaries, there can still be protective benefits from such a trust.

Speak to your estate planning lawyer to get advice on what makes sense in your situation.

Theresa Arsenault, Q.C. helps clients with estate planning and business and real estate matters.

The content made available on this website has been provided solely for general informational purposes as of the date published and should NOT be treated as or relied upon as legal advice. It is not to be construed as a representation, warranty, or guarantee, and may not be accurate, current, complete, or fit for a particular purpose or circumstance. If you are seeking legal advice, a professional at Pushor Mitchell LLP would be pleased to assist you in resolving your legal concerns in the context of your particular circumstances.

It is prohibited to reproduce, modify, republish, or in any way use content from this website without express written permission from the Chief Operating Officer or the Managing Partner at Pushor Mitchell LLP. Third party content that references this publication is not endorsed by Pushor Mitchell LLP and in no way represents the views of the firm. We do not guarantee the accuracy of, nor accept responsibility for the content of any source that may link, quote, or reference this publication.

Please read and understand our full Website Terms of Use and Disclaimer here.

Legal Alert, Pushor Mitchell’s free monthly e-newsletter