The trust is a separate estate in which a person transfers assets, called the settlor, for the benefit of certain persons, called beneficiaries. This estate is administered according to the rules established by the settlor.

This estate can be created for various reasons, such as:

• retain control over assets that the settlor decides to dispose of;
• ensure the survival of a family business, particularly by delaying the appointment of successors;
• facilitate a smooth transfer of the trust's capital to the settlor's successors;
• protect the trust's capital from economic risks (bankruptcy), legal risks, and family conflicts (divorce, separation);
• ensure the future financial security of these successors and the preservation of the estate;
• provide certain tax advantages (income splitting);
• avoid certain guardianship or curatorship formalities;
• protect and provide income for a disabled child.

The trust is established through a notarized contract between the settlor and the trustees he appoints. It is subject to the provisions of the Civil Code of Quebec, which requires the appointment of a trustee who is not a beneficiary of the trust. The settlor can appoint himself as the trustee, but must act with a trustee who is neither settlor nor beneficiary.

Some tax considerations also restrict dual roles within trusts. The concept of control over the trustees' vote is important and may affect the rules for attributing the trust's income to the settlor.

A trust known as an "asset protection trust" differs from a testamentary trust in that it is created during the settlor's lifetime.

Trusts created during the settlor's lifetime, referred to as "inter vivos" trusts, as well as trusts created in a will, are treated as individuals for tax purposes. Inter vivos trusts are subject to the current maximum marginal rate for individuals and are not entitled to any personal tax credits. Testamentary trusts may benefit from progressive tax rates and certain credits.

We invite you to consult a member of the Notaire-Direct^® team because:

• the notarized asset protection trust is easily identifiable and thus eliminates the risk of it being lost, ignored, or destroyed;
• the notary is a legal advisor and a specialist in contract drafting.

If you lack time to consult us, visit our Frequently Asked Questions.