Home Breadcrumb caret Tax Breadcrumb caret Estate Planning Breadcrumb caret Industry Breadcrumb caret Industry News 5 reasons trusts work for incapacity planning A trust is a legal relationship in which a person (the settlor) transfers property to another person (the trustee) May 24, 2012 | Last updated on May 24, 2012 2 min read Continuous. A trust continues to exist after a client dies—so management of the property continues uninterrupted. Neither incapacity nor the settlor’s death affects a trustee’s authority. On the other hand, a CPAP ends when the client dies, so beneficiaries have to wait until her will goes through probate for the executor to take over property management. This can cause major delays, because banks and other third parties typically require probate as proof of authority. Alter-ego & joint-partner trusts they must be created by a living settlor who’s at least 65. no one else can receive or use any trust income or capital until the settlor dies (for an alter-ego trust) or until both die (for a joint-partner trust). The settlor can transfer assets to the trust on a tax-deferred basis while alive. these trusts are taxed at the top marginal rate. Protective. A trust can outline the procedure for assessing incapacity, and requires the trustee participate with the settlor in decisions, or make them alone once the settlor becomes incapacitated. If the settlor can’t revoke the trust, these measures help ensure family members and others don’t unduly influence the management and distribution of the settlor’s property. By contrast, the person using a CPAP can still manage her own property, and even try to revoke the CPAP, after she becomes incapacitated. Private. A trust is confidential, so there is typically less scrutiny by courts or regulators. A CPAP, by contrast, is no longer valid if someone applies to the courts to appoint a guardian of property and the application is granted; that won’t happen if the property is under a trust. Interjurisdictional. When someone owns property in more than one province or country, and becomes incapacitated, she may need to appoint a power of attorney, guardian, or legal representative in each jurisdiction. That’s expensive and time-consuming. Using a trust avoids these requirements. Before choosing a trust, assess your client’s circumstances, along with tax implications, any professional planning and administration costs, possible ongoing trustee fees, and your client’s comfort level in sharing decision-making with co-trustees. Save Stroke 1 Print Group 8 Share LI logo Comprehensive. Trustees’ duties and powers can be tailored to many circumstances. CPAPs rarely outline how to appoint and replace attorneys, and they don’t usually give detailed directions explaining how to manage the property. Continuous. A trust continues to exist after a client dies—so management of the property continues uninterrupted. Neither incapacity nor the settlor’s death affects a trustee’s authority. On the other hand, a CPAP ends when the client dies, so beneficiaries have to wait until her will goes through probate for the executor to take over property management. This can cause major delays, because banks and other third parties typically require probate as proof of authority. Alter-ego & joint-partner trusts they must be created by a living settlor who’s at least 65. no one else can receive or use any trust income or capital until the settlor dies (for an alter-ego trust) or until both die (for a joint-partner trust). The settlor can transfer assets to the trust on a tax-deferred basis while alive. these trusts are taxed at the top marginal rate. Protective. A trust can outline the procedure for assessing incapacity, and requires the trustee participate with the settlor in decisions, or make them alone once the settlor becomes incapacitated. If the settlor can’t revoke the trust, these measures help ensure family members and others don’t unduly influence the management and distribution of the settlor’s property. By contrast, the person using a CPAP can still manage her own property, and even try to revoke the CPAP, after she becomes incapacitated. Private. A trust is confidential, so there is typically less scrutiny by courts or regulators. A CPAP, by contrast, is no longer valid if someone applies to the courts to appoint a guardian of property and the application is granted; that won’t happen if the property is under a trust. Interjurisdictional. When someone owns property in more than one province or country, and becomes incapacitated, she may need to appoint a power of attorney, guardian, or legal representative in each jurisdiction. That’s expensive and time-consuming. Using a trust avoids these requirements. Before choosing a trust, assess your client’s circumstances, along with tax implications, any professional planning and administration costs, possible ongoing trustee fees, and your client’s comfort level in sharing decision-making with co-trustees.