1. What Is a Trust in a Will?

2. What Does Alberta Law Say?

3. When a Trust May Be Appropriate

4. When a Trust May Not Be Necessary

5. How to Design a Testamentary Trust

6. Common Trust-Planning Mistakes

7. Costs, Taxes, and Administration

8. When Should You Speak With an Estate Lawyer?

9. How Bridgestone Law Can Help

Introduction

Leaving an inheritance outright is often the most direct approach. The beneficiary receives the property, and the executor can complete the estate administration without managing that gift for years. Sometimes, however, an immediate gift would create risk or fail to meet the will-maker's goals.

A will should be considered for a trust when a beneficiary is too young to manage an inheritance, has a disability or receives income-tested benefits, may need help managing money, or should receive support over time rather than a lump sum. Trusts can also help in blended families, preserve a home or business, and provide for one person during life while directing what remains to others later.

A trust is not automatically better than an outright gift. It requires a capable trustee, clear instructions, ongoing records, tax filings where required, and enough value or purpose to justify the administration. The right question is not simply whether a trust offers more control, but whether that control is necessary, workable, and proportionate.

What Is a Trust in a Will?

A trust created by a will is commonly called a testamentary trust. It begins because of a person's death. The will directs a trustee to hold and manage certain property for one or more beneficiaries according to stated terms.

Three roles are involved:

• the will-maker, who creates the terms in the will;

• the trustee, who legally controls and administers the trust property; and

• the beneficiary, who is entitled to benefit from the trust.

The will may require payments at set times or give the trustee discretion to decide when and how much to pay. It can authorize payments for education, housing, health, maintenance, or other purposes. It should also say when the trust ends and who receives any property then remaining.

The executor and trustee may be the same person, but the roles are distinct. The executor administers the estate. The trustee may continue managing a particular beneficiary's share long after the rest of the estate has been distributed.

What Does Alberta Law Say?

The Wills and Succession Act governs wills and succession in Alberta. A properly drafted will can create a trust and define the trustee's powers and the beneficiaries' interests.

Alberta's Trustee Act applies to trusts created by wills as well as other trusts. It addresses trustee duties, investment, administration, delegation, court applications, compensation, and other aspects of trust management. The will's wording and the legislation operate together.

A trustee is a fiduciary. This means the trustee must act loyally for the beneficiaries within the terms of the trust, avoid improper conflicts, exercise appropriate care, keep trust property separate, maintain accounts, and use powers for their proper purpose. The role is not an informal favor, even when the trustee is a family member.

Federal income-tax law also applies. A testamentary trust may need a trust account and annual T3 returns. Most testamentary trusts do not automatically receive the graduated personal tax rates historically associated with them. Under current federal rules, graduated rates are generally limited to a deceased person's qualifying graduated rate estate for up to 36 months and to a trust that qualifies and elects as a qualified disability trust for a particular tax year. The tax treatment depends on the trust, its beneficiaries, the income retained or paid, and elections made.

Trust drafting should therefore be coordinated with current tax advice. A trust can serve an important family purpose even without a tax advantage, but its after-tax cost should be understood.

When a Trust May Be Appropriate

A beneficiary is under 18

A minor generally cannot receive and manage a substantial inheritance in the same way as an adult. A parent or guardian does not automatically have authority simply to take and use the child's money. Without suitable will provisions, funds may need to be paid to or managed with the involvement of Alberta's Public Trustee or under a court-authorized arrangement.

A will can name a trustee, permit payments for the child's benefit, and choose an age for final distribution. The trust might allow the trustee to pay school, health, housing, or activity expenses and then distribute the balance at a stated age.

The age should be selected thoughtfully. Giving the entire inheritance at 18 may be too early for some beneficiaries, while keeping a modest gift in trust until 30 may create unnecessary cost. Staged distributions, such as portions at different ages, can balance access and protection.

A beneficiary has a disability

An outright inheritance may be difficult for a beneficiary to manage and may affect eligibility for income-tested government programs. A carefully designed discretionary trust may allow a trustee to supplement the beneficiary's quality of life without giving the beneficiary an enforceable right to demand the trust property.

These arrangements are often called Henson trusts, although the label alone does not make a trust effective. The wording, trustee discretion, benefit program rules, beneficiary's circumstances, and tax treatment all matter. Alberta benefit policies and federal qualified-disability-trust rules are separate issues and should both be reviewed.

The choice of trustee is particularly important. The person should understand the beneficiary's needs, benefit rules, record-keeping, tax filings, and the long-term nature of the role. A professional or co-trustee may be appropriate for a large or complex trust.

An adult beneficiary may need financial protection

A trust may help when a beneficiary has a history of addiction, impulsive spending, financial exploitation, or difficulty managing a large sum. The trustee can make payments for specified needs or distribute income and capital gradually.

The drafting should avoid relying on vague judgments about whether someone is “responsible.” Clear purposes and workable discretion reduce conflict. The plan should also account for improvement: a beneficiary's circumstances at the will-maker's death may be very different from those present when the will was signed.

A trust does not offer absolute protection from every creditor, family-property claim, tax liability, or court order. The degree of protection depends on the terms and applicable law. It should not be presented as a guaranteed shield.

A blended family needs support and preservation

A person may want a surviving spouse or adult interdependent partner to have income, housing, or access to property during life while preserving the remaining capital for children from an earlier relationship. A spouse or partner trust can sometimes serve both goals.

The will must address practical questions. Who pays property taxes, insurance, repairs, and major renovations? Can the home be sold and replaced? May the spouse receive capital as well as income? What happens if the spouse moves, remarries, or needs long-term care? Who receives the remainder?

Trusts do not remove the need to consider the survivor's rights under Alberta law, including possible family maintenance and support or family-property issues. Federal rollover requirements and tax consequences also need specialized advice.

A beneficiary should receive support over time

A trust can provide regular income, reimburse expenses, or let a trustee make payments according to need. This may be useful for an elderly sibling, a dependent relative, or an adult child whose circumstances call for continuing support.

The will should identify the intended standard of support and the relationship between income and capital. It should also explain what happens if the original purpose ends earlier than expected.

The estate includes a business, farm, or income-producing property

An immediate division may disrupt a business or force the sale of land. A trust may hold shares or property while a transition occurs, provide income to family members, or preserve voting control.

This planning is rarely accomplished by the will alone. Shareholder agreements, corporate records, insurance, tax planning, land ownership, and the abilities of the proposed trustee must align. A trust that requires trustees to operate a business without sufficient authority or expertise can create rather than solve problems.

A gift has a long-term charitable or family purpose

A trust may fund education, maintain a family property, support a charitable purpose, or benefit a defined group over time. Long-term purposes require particularly careful drafting.

The will should set realistic rules for expenses, trustee succession, changing circumstances, and eventual termination.

When a Trust May Not Be Necessary

A trust may add little value when the beneficiary is a capable adult, the gift is modest, and there is no need for ongoing control. The trustee's duties and annual administration may consume time and money that would otherwise pass to the beneficiary.

An apparent problem may also be solved more directly. A specific gift, a well-chosen executor, a properly coordinated beneficiary designation, insurance, or a separate agreement may sometimes meet the goal without a long-term trust.

The desire to control an adult beneficiary indefinitely should be examined carefully. Restrictions that seem sensible today may become impractical after changes in health, housing, relationships, or the economy. A trust should protect a legitimate interest without becoming needlessly rigid.

How to Design a Testamentary Trust

1. Define the purpose

The will-maker should be able to explain what the trust is intended to accomplish. Protecting a minor until a suitable age calls for different terms than supporting a spouse for life or preserving benefits for a person with a disability.

2. Identify the property

The trust may receive a fixed amount, a particular asset, a percentage of the estate, or the residue after other gifts. The plan should consider whether enough liquid property will be available to pay taxes, expenses, and ongoing trust costs.

Assets with beneficiary designations or joint ownership may not pass through the will. A trust cannot manage property it never receives, so ownership and designations must be coordinated with the estate plan.

3. Choose the trustee and alternates

The trustee needs financial judgment, integrity, patience, and the ability to deal fairly with beneficiaries. Location, age, health, family relationships, and willingness to maintain records matter. A will should name one or more alternates.

Co-trustees can combine family knowledge with financial skill, but joint decision-making can cause delay or deadlock. The document should specify how decisions are made and how a trustee may resign or be replaced.

4. Decide between fixed and discretionary payments

A fixed trust directs payments at particular ages, dates, or amounts. It is predictable but may not adapt well. A discretionary trust gives the trustee authority to respond to circumstances but places more responsibility on the trustee and may create uncertainty for the beneficiary.

Many trusts use both approaches: discretionary support while the trust continues, followed by mandatory distributions at chosen ages or events.

5. Set the trustee's powers and guidance

The trustee may need authority to invest, retain or sell assets, hire advisers, make tax elections, pay expenses directly, lend to a beneficiary, buy or maintain a home, operate a business, or divide property in kind. Powers should suit the assets and purpose rather than rely on a generic list.

A non-binding letter of wishes can explain family context and preferences, but it should not contradict the will or replace essential trust terms.

6. Plan for change and termination

The will should address what happens if a beneficiary dies, recovers, no longer qualifies for a benefit, refuses assistance, or outlives the expected trust period. It should name remainder beneficiaries and give workable rules for the final distribution.

Long-running trusts should also account for replacement trustees, administrative amendments where legally available, tax changes, and the possibility that the trust becomes uneconomic.

Practical Examples

A trust for young children

Amir and Leah have two children, ages six and nine. Their wills direct the trustee to use each child's share for education, health, and maintenance, with staged distributions in adulthood. They name a financially experienced sibling as trustee and a different family member as guardian, recognizing that the roles require different skills.

A discretionary trust for a vulnerable beneficiary

Ruth's adult daughter receives disability benefits and needs help managing money. Ruth's will creates a fully discretionary trust rather than giving the inheritance outright. The drafting is coordinated with advice about current benefit rules and trust taxation, and the trustee is given guidance about enhancing the daughter's quality of life.

A home in a blended family

Michael wants his spouse to remain in their Calgary home while ensuring that the property's remaining value ultimately passes to his children. His will creates a trust with detailed rules about occupancy, expenses, sale, replacement housing, and final distribution. The plan is reviewed alongside title, tax, insurance, and the spouse's legal rights.

These examples illustrate possible structures only. The appropriate terms depend on the people, property, applicable benefits, and tax consequences.

Common Trust-Planning Mistakes

Choosing the trust before defining the problem

A trust is a tool, not a goal. Adding one because it sounds protective can create administration without solving a specific need.

Naming an unsuitable trustee

A loving relative may lack the time, skill, neutrality, or long-term availability required. Conflict between a trustee and beneficiary can undermine even careful drafting.

Using rigid payment ages or conditions

Fixed terms may not fit the beneficiary's future health, maturity, education, or housing needs. The will should balance certainty with appropriate flexibility.

Ignoring tax and filing obligations

A trust may require annual T3 returns, tax slips, accounts, and professional advice. Assuming that every testamentary trust receives low tax rates can lead to poor planning.

Failing to coordinate beneficiary designations

If insurance or a registered account names an individual directly, the proceeds may bypass the trust in the will. The result can differ significantly from the intended plan.

Giving the trustee too little authority

A trustee who must manage a home, business, or specialized portfolio needs suitable powers. Missing authority may require a court application or force an impractical decision.

Trying to control a beneficiary forever

Excessive restrictions can create resentment, disputes, and high costs. A proportionate plan should protect a real interest and include an achievable end point.

Forgetting the remainder

Every trust should address who receives what remains when the primary beneficiary dies or the trust otherwise ends. An incomplete gift-over can create uncertainty or an unintended distribution.

Costs, Taxes, and Administration

The cost of creating the trust terms depends on their complexity and the professional advice required. A minor's staged trust may be relatively straightforward. A disability, spouse, business, farm, or cross-border trust may require legal, accounting, tax, benefits, valuation, or corporate advice.

After death, ongoing costs can include trustee compensation, investment management, legal advice, accounting, tax preparation, property expenses, and appraisals. A trustee must keep adequate records and may need to provide formal accounts to beneficiaries or the court.

Tax consequences are fact-specific. Income retained in many testamentary trusts may be taxed at the top marginal rate unless a particular exception applies, while amounts paid or made payable to beneficiaries may be deductible to the trust and taxable to them, subject to the Income Tax Act. Capital gains, rollovers, residence, attribution, benefit eligibility, and the trust's duration can change the analysis.

Before including a trust, compare its likely value and purpose with its expected administration. A modest inheritance may be better served by a shorter or simpler structure, while a trust protecting a vulnerable beneficiary may be justified even when ongoing costs are significant.

When Should You Speak With an Estate Lawyer?

Legal and tax advice is particularly important when:

• a beneficiary is a minor or has a disability;

• a beneficiary receives AISH or another income-tested benefit;

• the family is blended or a spouse is to benefit for life;

• an adult beneficiary may need creditor, exploitation, addiction, or money-management protection;

• the estate includes a business, farm, rental property, or foreign asset;

• the trust may continue for many years;

• a professional or corporate trustee is being considered;

• beneficiary designations must fund or coordinate with the trust;

• the will-maker wants unequal gifts or significant restrictions; or

• tax savings are presented as a reason for the trust.

A lawyer can help determine whether a trust is proportionate, draft enforceable and flexible terms, and coordinate the will with asset ownership and beneficiary designations. An accountant, benefits specialist, financial planner, or corporate adviser may also be needed.

How Bridgestone Law Can Help

Bridgestone Law assists individuals and families in Calgary and throughout Alberta with wills, trusts, estate planning, probate, and estate administration. We can help identify whether a testamentary trust fits your goals, choose practical terms and decision-makers, and coordinate the trust with the rest of your estate plan.

Careful planning can provide meaningful protection without creating unnecessary complexity for the people who will administer and benefit from the trust.