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Estate Law Articles
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7 Potential Problems with Inter Vivos Trusts
Problem #1: Choosing the wrong Trustee. Many people believe that you must name your bank as your trustee, but this is not the case. We do sometimes recommend professional Trustees but often recommend others. You may also hire a professional fiduciary who is not affiliated with a bank or trust company.
Problem #2: Leaving your Trust empty. A Trust is like a safe deposit box. It’s a good place to put your valuables, but it won’t do any good if you leave it empty. It’s not uncommon for people to have a lawyer draw up their Trust and then, years later, still have to go through probate. Why? Because neither they nor their lawyer ever put their significant assets into the Trust. Your property must be put into the Trust.
Problem #3: Initial cost. A Trust is more expensive to set up than a simple Will. But, in the long run, the cost may be much less because the Trust allows you to avoid probate, Court supervised Estate administration and guardianship proceedings.
Problem #4: The potential for poor management. You could find that the person you selected to manage your affairs as your Trustee is not a good manager. Your choices for successor Trustee(s) should be family members or friends you can trust. Professional corporate trustees, such as banks, are also an option. But, even if you do put your assets into a Trust, you could still have a problem with management of your assets.
Problem #5: Refinancing real estate may be inconvenient or not possible. Some mortgage companies and banks require that you take real estate out of your Trust before they will place a new mortgage on your property. Once the financing is complete, then your Trustee(s) might transfer the property back into the Trust but there is risk that the lender may view that as a breach of its mortgage terms and call the loan.
Problem #6: Keeping a list of assets in your Trust. Some people don’t like to keep track of assets they put into their Trust. Others don’t mind this small amount of extra work. When you want to add something to your Trust, you certainly should simply title it in the name of the Trustees and add it to your list.
Problem #7: Opening a new bank account. Some banks will require you to close your current bank account and open a new bank account if you transfer the account into a Trust. This is a matter of the bank being uninformed. If you have substantial direct deposits or automatic debits, it will be necessary to see that the new account is functioning properly before closing the old account.
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Parker & Company
Barristers & Solicitors
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Toronto, Ontario M4P 2L3
Tel: (416) 322-3370
Fax: (416) 322-7153
parkerandcompany@parkercompany.ca
www.parkercompany.ca
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