Episode Summary

In this episode, Gordon and Jenna dive deep into the topic of testamentary trusts and their role in creditor protection. They explore the situations in which establishing a trust as part of an estate plan might be beneficial, including:

• Protecting beneficiaries with poor money management skills, substance dependency, or disabilities.
• Safeguarding assets from external creditors, marital claims, or other financial risks.
• Maintaining a clear distinction between inheritance and personal assets to prevent commingling.

They also touch on the legal nuances of trust structures, including how trusteeship impacts creditor claims and best practices for setting up a trust to ensure its effectiveness.

Key Takeaways

1. Why Use Testamentary Trusts?
    
   • Testamentary trusts, created through a will, are useful for situations where direct inheritance might lead to adverse outcomes (e.g., mismanagement, marital claims, or dependency issues).
2. Key Features of Trusts:
    
   • Divided Ownership: Legal and beneficial ownership of assets is separated, offering creditor protection.
   • Flexibility and Control: The trust terms can be tailored to the needs of beneficiaries while safeguarding assets.
3. Trustee Selection:
    
   • Independent or co-trustees are recommended to prevent misuse and strengthen legal protection.
   • Allowing the beneficiary to act as sole trustee may weaken the trust's creditor protection.
4. Legal Considerations:
    
   • Proper drafting is critical to withstand creditor claims or legal challenges. 
   • Courts may scrutinize trusts to ensure they’re not being used improperly to evade creditors.
5. Practical Benefits:
    
   • Trusts help document inheritance and keep it separate from personal finances, reducing risks associated with commingling.

Key Questions Answered

• How do trusts protect against creditors?
• What should you consider when choosing a trustee?
• What are the risks of having a sole beneficiary act as trustee?

Resources Mentioned

• Family Property Act (Alberta)

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Hosts:
Jenna Carvalho
The smartest way to choose an executor.
Guardian Estate Company
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Gordon VanderLeek
Give your family a legacy of protection - Wills, Estates and Trusts.
VanderLeek Law
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