Written by Ron Cooke, President & Founder of Strategic Wealth Protection Partners in Ontario
How does an irrevocable trust work in Canada?
An irrevocable trust in Canada is a legal arrangement where the grantor transfers ownership of assets into the trust, relinquishing control over them.
Once established, the terms of the trust cannot be changed or revoked without the consent of the beneficiaries. This type of trust is often used to protect assets, reduce taxes, and provide for beneficiaries under specific terms.
Which types of irrevocable trusts are used in estate planning in Canada?
Common types of irrevocable trusts in Canada include spousal trusts, joint partner trusts, and alter ego trusts.
These trusts provide benefits such as deferring taxes or ensuring financial security for a surviving spouse. Trusts for minors or those with special needs are also frequently used, ensuring the assets are managed responsibly and according to the grantor’s wishes.
What are the pros and cons of an irrevocable trust?
An irrevocable trust offers advantages like asset protection, reduced taxes, and avoiding probate.
However, it has drawbacks, such as the loss of control over assets and inflexibility once established.
| Pros of an Irrevocable Trust | Cons of an Irrevocable Trust |
|---|---|
| Protects assets from creditors | Loss of control over assets |
| Reduces estate and income taxes | Inflexible and cannot be easily changed |
| Avoids probate | Requires professional setup and fees |
| Ensures privacy in asset distribution | Assets may not be accessible by grantor |
| Provides for specific beneficiary needs | Complex administration requirements |
Learn about the Pros and Cons of Putting a House in a Trust in Canada HERE >
Can you withdraw money from an irrevocable trust?
No, you generally cannot withdraw money from an irrevocable trust once the assets have been transferred.
The trustee manages the assets according to the trust’s terms, and the grantor’s access is limited. However, beneficiaries may receive distributions based on the trust’s provisions.
What happens to an irrevocable trust when the grantor dies?
When the grantor of an irrevocable trust dies, the trust continues to operate as per its terms.
The trustee manages and distributes the assets to the beneficiaries as outlined in the trust document. Since the assets are not part of the grantor’s estate, they bypass probate and may provide significant tax savings.
Why would someone choose an irrevocable trust?
People choose irrevocable trusts for asset protection, tax benefits, and ensuring specific wishes for asset distribution.
They are especially useful for safeguarding assets from creditors, reducing estate taxes, and providing for vulnerable beneficiaries. The trust’s permanence offers certainty and legal protection.
Is a living trust irrevocable?
No, a living trust is typically revocable, allowing the grantor to change or dissolve it during their lifetime.
However, it becomes irrevocable upon the grantor’s death. This flexibility makes living trusts a popular choice for estate planning while the grantor is alive.
Is a family trust irrevocable?
Family trusts in Canada can be either revocable or irrevocable, depending on how they are set up.
Irrevocable family trusts offer benefits like tax savings and asset protection but come with the drawback of limited flexibility. Consulting a professional can help determine the best structure for your family’s needs.
Discover the Benefits of a Living Trust in Ontario
Are you an Ontario resident considering a living trust as part of your estate planning?
At Strategic Wealth Protection Partners, we’re here to guide you through every step of the process with expert advice and personalized support. Begin your estate planning journey today with a Living Estate Plan Consultation from our experienced team.
Our mission at SWPP is to help you create an estate plan that secures your legacy, shields your assets from unnecessary taxation, and ensures your loved ones are cared for. By designing a living trust tailored to your goals, our experts will help you build a plan that truly reflects your values and priorities.
Take control of your future—start planning today!
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Planning your legacy is about more than numbers—it’s about ensuring your family remembers you and your values are honoured for many years to come.
Estate planning and trusts can feel overwhelming, especially if it’s your first time. That’s why we’re here.
With our simple, 5-Step Living Estate Plan, we make the process easy, helping you create a comprehensive estate plan or trust that protects your assets from taxes and probate fees while preserving your legacy. Tools like The Final Word Journal capture your story, wishes, and essential details like accounts and end-of-life plans, ensuring your family has clarity and comfort.
Take the first step today—schedule a consultation call and give your family the ultimate gift: peace of mind and the assurance they were always your priority.
Read More
If you’re starting your estate planning process, you may find these articles helpful:
- Is a Living Trust Better than a Will in Canada?
- How to Create a Living Trust in Canada
- How Much Does a Living Trust Cost in Ontario?
About the Author
RON COOKE, PRESIDENT & FOUNDER OF STRATEGIC WEALTH PROTECTION PARTNERS
With over 30 years in financial services, I’ve seen the challenges families face when a loved one passes—lost assets, unnecessary taxes, and emotional stress. That’s why I created the Living Estate Plan, a comprehensive process to protect assets, eliminate estate and probate fees, and create legacies that are remembered for many years to come.
This plan ensures your family receives not just your wealth, but a meaningful reminder of your care and love. Tools like The Final Word Journal capture your story, wishes, and essential details, offering clarity and comfort during difficult times.
Your final gift should be more than money—it should be peace of mind, cherished memories, and an organized estate.
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