Wills vs. Living Trusts: What’s the Right Move for Your Estate?

Most Canadians assume a will is enough to protect their assets. Spoiler: It’s not.

A will determines who gets what when you pass away, but it doesn’t help minimize taxes, avoid probate, or keep your estate private. That’s where a living trust comes in. If you own real estate, investments, or a business, you could be losing tens of thousands to taxes and legal fees just by not structuring things properly.

So, which one is right for you? Let’s break it down.

Wills vs. Living Trusts: The Key Differences

A will simply states who inherits your assets. A trust allows you to control when and how they receive them—while also reducing probate costs.

The Problem with Just Having a Will

Relying solely on a will comes with a few drawbacks:

• Probate Fees – The government takes a cut before your heirs receive anything.

• Public Process – Wills become public records, meaning anyone (even nosy neighbors) can access them.

• Delayed Transfers – Probate can take months or even years, depending on your estate’s complexity.

• No Tax Deferral – If you own investment properties or a business, expect a big tax bill when you pass away.

When a Living Trust Makes More Sense

A living trust isn’t just for the ultra-wealthy. It’s for anyone who wants to:

• Avoid probate – Assets transfer smoothly and privately.

• Reduce taxes – Trusts can defer capital gains, though they don’t eliminate tax liability.

• Protect assets – Some irrevocable trusts offer creditor protection (revocable ones do not).

• Control wealth transfer – Distribute money over time instead of in a lump sum, preventing heirs from mismanaging their inheritance.

The Two Main Types of Living Trusts

• Revocable Trusts – You retain control, but assets remain part of your estate, meaning no creditor protection or tax sheltering.

• Irrevocable Trusts – You lose control, but gain stronger asset protection and potential tax benefits.

A Bonus for Canadians 65+

Alter Ego Trusts allow tax-free asset transfers and defer capital gains taxes until death, helping avoid the CRA’s 21-year deemed disposition rule.

Who Should Consider a Living Trust?

A trust may be the right move if you:

✔ Own real estate beyond your primary residence.

✔ Have an investment portfolio that could trigger capital gains taxes.

✔ Run a business and want a seamless succession plan.

✔ Want to avoid probate and legal complications for your heirs.

✔ Are 65+ and looking for tax-efficient

wealth transfer options.

The Drawbacks of a Living Trust

• Higher setup costs compared to a will.

• Requires ongoing legal and financial management.

• May not be necessary for small estates with minimal assets.

Do You Still Need a Will?

Yes. Most people need both a will and a trust to ensure full estate protection.

What’s Right for You?

• If you own a home and have basic savings → A will is likely sufficient.

• If you have multiple properties, a business, or investments → A living trust is probably the smarter move.

• If you’re 65+ and looking to protect your wealth → An alter ego trust could save you a fortune in taxes.

Before making a decision, talk to a tax advisor or estate planner to build the best plan for your situation.