Trusts - “Just the Basics” Introduction The use of a trust can be important for both tax and non-tax reasons. A trust may be implemented for complex planning or to simply ensure that funds are directed in a certain manner to a beneficiary of the trust. This Tax Topic will deal with personal trusts. A personal trust is defined in s. 248(1) of the Income Tax Act, (the “Act”). It is defined to be either a testamentary or inter vivos trust, where interests in the trust were not acquired for consideration paid either to the trust or to a person who contributes property to the trust. This Tax Topic will be part of a two part series on Trusts. In this Tax Topic, basic issues including the taxation of trusts will be looked at in some detail. The second Tax Topic in this series will examine the different types of trusts that exist in the context of planning with life insurance. The use of trusts date back over six hundred years. The original purposes stemmed more for legal uses rather than tax reasons. However, trusts have evolved into being considered an important taxplanning vehicle. In our current context, trusts have married both tax and legal benefits together. Trusts are a conduit for income tax purposes and for legal purposes they are useful for control and ownership. Note should be made of the 2014 Federal Budget which contains proposed changes to the tax treatment of testamentary trusts. The most significant change includes the elimination of the graduated rates that currently apply to testamentary trusts and grandfathered inter vivos trusts created before June 18, 1971. These proposals are not included in the discussion below regarding the taxation of testamentary trusts however, the reader should be mindful of these proposed changes. This Tax Topic contemplates the application of trust law in the common law provinces and not Quebec. Structure and Parties A trust is a relationship between the trustee, who holds legal title to the subject property of the trust and the beneficiaries, who hold beneficial title to that subject property. Beneficial ownership means that the beneficiary does not have title to the property but has rights in the property, which is a normal incident of ownership. The trustee has a fiduciary duty to the beneficiaries of the trust to ensure that at the end of the day, the capital and income of the trust have been appropriately held for their benefit. 2 The three parties to a trust are the settlor, trustee and beneficiary. 1) Settlor The settlor is the individual who settles the trust. Legal title to the subject property of the trust is transferred to the trustee of the trust for the benefit of the beneficiaries. When a trust is revocable, the settlor continues to enjoy control over the property and can revoke the trust as specified in the trust document. The settlor in this instance can be a beneficiary under the trust. When a trust is irrevocable the settlor gives up his or her right to enjoy property transferred to the trust and will generally not be a beneficiary under the trust. Making a distinction between the two types of trusts is relevant from a tax perspective when considering the application of the attribution rules. These rules will be covered in greater detail later. The Act defines the settlor of the trust in the context of the trust. Where a testamentary trust exists, the settlor is the individual whose death caused the trust to come into existence. In the event of an inter vivos trust, the settlor is the individual who transfers property to the trust during his or her lifetime. A more detailed discussion of these trusts will follow. The fair market value of the property transferred to the trust by the settlor cannot be exceeded by the fair market value of other property subsequently transferred to the trust by other parties. If this occurs, there may be a question as to who is the actual settlor of the trust. This becomes relevant for tax reasons when considering the attribution rules. 2) Trustee Trustees are guided in their powers and obligations by the trust document itself. Where the document is silent on powers and obligations or in the instance where no trust document exists, provincial trustee legislation is applied. The common law provinces have now adopted a prudent investor approach. The selection of a trustee may be difficult. There are some preliminary considerations that should be undertaken before appointing a trustee. The settlor of the trust should not be a trustee of the trust due to the attribution rules. A beneficiary of the trust may be a trustee. To establish the trust however, there should be a separation between legal ownership and beneficial ownership. There is also the potential for a conflict of interest given that the beneficiary is also a trustee. Actions taken by the trustee, who is a beneficiary, may be viewed as self-serving and not in the best interests of all of the beneficiaries. As a result, it is preferable to name other parties to be trustees. It is extremely important to assess the person who will take on the role of trustee. In many instances, the settlor may seek an individual who knows them well and understands the way in which he or she would like the property distributed. The complexity of the trust should be considered. The potential for a conflict of interest is also a matter that should be reviewed. For instance, children who will ultimately be beneficiaries under the trust may not be suitable to also be a trustee of the trust. Where there is no suitable trustee, a corporate trustee may be considered. The fees associated with this service however should be considered in light of the size of the trust and its complexity. i) Residency Until recently a trust has been considered to be resident where a majority of its controlling trustees reside. However, residency of a trust has recently been considered by the court and the case law is discussed in greater detail below. In the Garron Family Trust case, the court considered that the management and control of assets occurred in Canada although the corporate trustee of each trust was in the Barbados. The Federal Court of Appeal (FCA) later dismissed the appeal of the case (St. Michael Trust Corp. et. Al v. Canada 2010 FCA 309, 2010 DTC 5189 (referred to as the “Garron” case). The case was appealed to the Supreme Court of Canada where the Court confirmed that the appropriate test to apply when determining the residence of a trust is the “central management and control” test. The question is: where is the trust’s real business carried on? The answer to that question provides insight as to residency. 3 In Antle, a serious of transactions where property was sold to a Barbados Spousal Trust were considered by the court. The taxpayer argued that there was no taxable capital in Canada because the trust was not resident in Canada. The court indicated that the facts fell outside of the court’s very clear enunciation of a Canadian resident for trust purposes. The court determined that the series of transactions did not create a trust. The trust was found to be a sham. The case was appealed to the Federal Court of Appeal and dismissed. (see Antle v. Canada, 2010 FCA 280, 2010 DTC 5172). If the trustees emigrate to a new jurisdiction, the trust will become a non-resident of Canada. It is therefore important that the drafter of a trust document be fully aware of any potential residency issues of the trustees. If the trust becomes a non-resident, all the tax consequences associated with the emigration of the trust will apply, resulting in a deemed year end immediately before that time as well as a deemed disposition and reacquisition of each property of the trust at fair market value. (See s. 128.1(4)(b) and proposed s. 94(5)) of the ITA). The use of non-resident and off shore trusts in planning is beyond the scope of this paper, but caution should be used when considering these types of trusts, as there are many issues to review before implementing them. Determining the trustee who has “control or management” of the trust may be difficult to assess. Canada Revenue Agency (CRA) has indicated that where a trustee exercises more than 50% of management and control of the trust in a jurisdiction, that will be a determinative factor. Attention should also be given to provincial conflict law, where in some jurisdictions the trustee must not only reside in a jurisdiction but also must administer a trust in that place. Interpretation Bulletin, 447, “Residence of a Trust or Estate”, enumerates several factors to be considered in determining the trustee who possesses management and control including: changes in the trust investment, control over assets, management of assets, banking, power to contract with professional advisors and responsibility for the preparation of the trust accounts. 3) Beneficiary(ies) The beneficiary will be entitled to the use and enjoyment of the subject property of the trust. Beneficiaries can either receive income or capital or both from the trust depending upon the trust terms on distribution. The trustee has a fiduciary duty to take an “even hand” approach to distribution from the trust unless the trust document dictates another scheme. In the case of a minor beneficiary (under the age of majority which varies from province to province) payment cannot be made directly to the minor beneficiary. An application however may be made to the court to provide for the payment of income towards the beneficiary’s maintenance, education or benefit. Most provincial trustee legislation will permit the court to approve payment for food, shelter, clothing, special care and education. A court may also allow for capital payments for the benefit of a minor to be made where warranted. i) Beneficiaries and corporations The relationship of the beneficiaries of a trust to a corporation must also be considered as it may have adverse tax consequences. Corporations could be associated depending upon the control attributed to the beneficiaries of a trust pursuant to s. 256 (1.2)(f) of the Act. This provision sets out that each beneficiary of a discretionary trust (see discussion below on discretionary trusts) is deemed to own each of the shares of the corporation, which are owned by the trust. In the case of a nondiscretionary trust, beneficiaries are deemed to own the proportion of shares that relate to their beneficial interest in the trust. When an individual owns shares in a corporation and also is a beneficiary of a trust that owns shares in a corporation, the two corporations could be considered “associated”. Corporations will wish to avoid this situation because it would cause a sharing of the small business limit for purposes of the small business deduction. Requirements to create a trust In order to meet the legal requirements of a trust three certainties must exist. The three certainties are: 1. Certainty of intention – meaning a clear intention to create a trust by the settlor; 2. Certainty of property – means the property must be clearly ascertainable; 3. Certainty of beneficiaries – meaning the beneficiary must be clearly identifiable either by name or class. 4 If these three elements do not exist the trust will fail. Trusts can be created either informally or formally by way of written documentation. A formal written trust is preferred because it can confirm the intention of the testator and the existence of the three certainties. When insurance is part of the subject property of the trust, the insurance policy should be clearly identified so as to meet the requirement set out under point 2 above. Distributions from a trust How distributions are made from the trust depends upon how the beneficiaries are defined and what they are entitled to under the terms of the trust document. Beneficiaries under a trust are either “income beneficiaries”, where they are entitled to only the income of the trust or “capital beneficiaries” (also referred to as “residuary beneficiaries”) where they would be eligible to receive the capital from the trust. What may be considered income for tax purposes may not be considered income for trust law purposes. See also CRA document no. 2004-0060161E5 for a discussion on this issue. Payments from a trust depend also upon the type of assets held in the trust. Payments can be in the form of cash, a transfer of assets “in specie”(a transfer of the very thing), or by way of a promise to pay as in the form of a promissory note. Where a non-discretionary trust exists, a beneficiary may enforce payment regardless of the provisions or conditions found in the trust document. In this instance, the rule in Saunders v. Vautier (1841) 49 ER 282 should be considered. In that case, a vested gift made on a contingency did not stand. It was determined that the beneficiary could claim the assets if there was no other individual who would have a claim to the assets if the contingency were not met. See also Guest v. Lott et al. 2013 ONSC 7781 where the rule in Saunders v. Vautier was applied. Proceeds of a life insurance policy paid to a trust will be distributed tax- free to the beneficiaries of the trust. The tax treatment of life insurance proceeds received by a trust is substantially the same as if the proceeds are received by the individual. Death benefit proceeds of a life insurance policy paid to a trust are received tax-free. (receipt of proceeds in consequence of death is not a “disposition” of a life insurance policy under s. 148(9) of the Act and therefore is not subject to tax). A payment from a trust may be made tax-free to a capital or income beneficiary in satisfaction of a capital or income interest of a trust (pursuant to subsection 107(2) or 106(2) and (3) of the Act. The trust document should identify capital and income beneficiaries notwithstanding that the beneficiary may receive death benefit proceeds from a life insurance policy via the trust, insurance proceeds do not retain their character when flowed through the trust (subsection 108(5) of the Act). As a result, if death benefits from a life insurance policy are distributed to a private corporation, the company will not receive a credit to the capital dividend account. It should be noted that although a life insurance policy is not capital property as defined under the Act, it nevertheless can constitute trust capital property and is eligible to be rolled out to the capital beneficiaries of the trust on a tax-deferred basis where subsection 107(2) of the Act applies. i) Discretionary trust v. non-discretionary Distributions from a trust arise from the trust document itself. A trust can be discretionary or nondiscretionary in nature. Determining whether the trust should be discretionary or not is very much driven on the basis of what situation the beneficiaries are in at the time distributions from the trust are contemplated. When a trust is discretionary, the trustee exercises discretionary powers in favour of the beneficiary as to when, if at all, payment will occur. This may be advantageous in a number of situations. In the case of a beneficiary facing creditors, payment can be deferred or paid to a third party on the discretion of the trustee. This avoids the payment being exposed to the creditors of the beneficiary. Where a beneficiary is disabled and receiving government assistant payments, a discretionary trust may be used to avoid jeopardizing these payments. A full discussion on what has been referred to, as a discretionary “Henson Trust” will follow in Part 2 of this Tax Topic. 5 Where marital breakdown may be at issue, entitlement to payments under a discretionary trust may not form part of the division or equalization calculation, because it is the trustee who controls when, and if, payment is to occur. The law in this area however is not entirely clear. In the Ontario case of Sagl v. Sagl (1997) 31 R.F.L. (4th) 405 (Ont. Gen. Div.) Mr. Sagl had a 1/7th interest in a discretionary family trust. Mr. Sagl and his wife had separated and were involved in very contentious matrimonial proceedings. The court determined that the 1/7th interest should be included in Mr. Sagl’s net family property calculation. However, a decision from the Alberta Queen’s Bench in Kachur v. Kachur [2001] 4 W.W.R. 294 (Alta. Q.B.) appears to contradict the reasoning in Sagl. There the husband’s interest in the discretionary trust was found to be nil because the true intent of the trust was to benefit the children and grandchildren. The trustee therefore would inevitably exclude the husband from distribution. Another interesting case to note in the family law context is the Ontario case pf Spencer v. Riesberry, 2012 ONCA 418 (CanLII). In Spencer, title to a home occupied as a family residence was owned by a family trust. On separation, the question became was this a matrimonial home and therefore subject to s. 18(1) of the Ontario Family Law Act? The residence was found to be excluded from a matrimonial home perspective but the interest in the trust had to be determined for equalization purposes. Taxation of a trust For the purposes of s. 104(2) of the Act, trusts are separate taxable entities. However, this is the only context in which this is the case. Trusts are not considered legal entities and cannot be sued. Trusts are taxed separate from the settlor and the beneficiaries. A trust may be required to pay income taxes. For the purposes of taxation, trusts fall into two categories: inter vivos and testamentary. Inter vivos trusts are taxed at an individual’s highest marginal tax rates on every dollar of income, while testamentary trusts are taxed at an individual’s graduated tax rates. a) Inter vivos trusts An inter vivos trust is created during the lifetime of the settlor. It is defined under s. 108(1) of the Act as a trust other than a testamentary trust. Inter vivos trusts have a calendar year end and file income tax returns on that basis. An inter vivos trust is entitled to a deduction for amounts paid or payable to its beneficiaries in calculating its income for tax purposes. Certain tax advantages could result by flowing income through the trust to low tax rate beneficiaries. Planning opportunities in this regard however have been curtailed by the “kiddie tax” or rules about income splitting. i) Kiddie tax – income splitting Prior to January 1, 2000, trusts were a very attractive way of splitting income between family members. Income could be transferred from a high-rate taxpayer to a low-rate taxpayer. The lowrate taxpayer usually included children. In 1999 the Federal Budget addressed this issue by implementing s. 120.4 of the Act now dubbed the “kiddie tax”. Prior to the “kiddie tax” rules coming into effect, income splitting was achieved by an inter vivos trust becoming a shareholder in a small business corporation. The beneficiaries of the trust would normally be the shareholders spouse, or dependent children. The trust would subscribe for common shares of the corporation either on incorporation or by the implementation of an estate freeze of the preexisting common shares. The corporation would then subsequently pay dividends on the common shares to the trust. The trust would then distribute or allocate this income to the low-income beneficiaries. This resulted in a significant reduction in the amount of tax paid both at the corporate level and personal levels. The kiddie tax provisions under the Act effectively cause split income to be taxed at the highest marginal tax rate for specified individuals. “Specified individuals” are those who are not 17 years of age prior to the taxation year, at no time in the year became a non-resident, and had a parent resident in Canada at any time in the taxation year. “Split income” includes income from a trust derived from taxable dividends, or property or services in support of a business carried on by a person related to the individual. 6 In the 2011 Federal Budget, the kiddie tax rules were extended to capture capital gains realized after March 22, 2011 by a minor or allocated to a minor from a disposition of shares to a person who does not deal at arm’s length with the minor, where taxable dividends from the shares would have been subject to the kiddie tax. Capital gains subject to this measure are treated as non-eligible and therefore do not benefit from a lower capital gains tax rate or the lifetime capital gains exemption. The 2014 Federal Budget proposals make it more difficult to split income with minor children. The new rules apply to the 2014 taxation year onward. The 2014 Budget expands the definition of split income to include business and rental income from third parties paid to a minor. The rules apply if a minor’s relative regularly performs income-generating activities, or in the case of a partnership, where the relative has an interest. ii) Tax-Free Rollover Property transferred to a trust (the subject property of the trust) is deemed to be disposed of at the time of transfer into the trust at fair market value. (See s. 107.4(3) of the Act) This may create a tax liability at the time of transfer to the settlor of the trust. This is why tax-free rollover planning opportunities are sought when creating an inter vivos trust. Alter ego and joint partner trusts are examples of trusts that allow for assets to be rolled into the trust tax-free. These trusts also avoid probate fees. Planning opportunities in these areas will be examined in the next Tax Topic in this series. b) Testamentary trusts Testamentary trusts are created through provisions in a will, by some other instrument or by consequence of death. Under s. 108(1) of the Act a testamentary trust means a trust or estate that arose on and as a consequence of the death of an individual. Only individuals can create a testamentary trust. A trust cannot be created by another trust or by a corporation. This is relevant for planning considerations where probate is in issue. (See the second Tax Topic in this series ”Trusts as a Planning Tool”). This brings into question whether an individual appointed under a power of attorney document would be able to create a trust for the purposes of tax and estate planning. (For a further discussion of considerations on this issue reference should be made to Part 2 of this Tax Topic and the Tax Topic entitled, “Powers of Attorney: How Far Can You Go with Estate Planning?”) Testamentary trusts are funded by assets of the estate or by other sources that do not form part of the estate. For instance, insurance proceeds can be used to settle an insurance trust, which is classified as a testamentary trust. An insurance trust can be created through the provisions in a will, by another instrument or by reference to the will in the contract. For a further discussion on insurance trusts see the Tax Topic “Insurance Trusts” and the “Insurance Trust Guide”. Testamentary trusts cannot be settled with property prior to the consequence of death. This will taint the trust and will cause the trust to be classified as an inter vivos trust. Clearly from a tax perspective this is not a desired result. As well, contributions made by another individual to the trust once the settlor has died will also cause the trust to be tainted. Assets from one testamentary trust can however flow into another testamentary trust without tainting the trust. (See Technical Interpretation #9801035 dated September 22, 1998). A testamentary trust can also lose its status when the trustee fails to distribute assets from it. If a trust is continued after it is to be collapsed (usually at 21 years) CRA takes the position that the trust then becomes an inter vivos trust. When this occurs, the trust income is taxed at the highest marginal tax rate. Unlike an inter vivos trust a testamentary trust can have a tax year other than the calendar year. Income that remains in the trust at the end of the year is taxed at the graduated tax rates making a testamentary trust a very attractive tax-planning vehicle. Income that is paid out to a beneficiary or for their benefit is taxed in the hands of the beneficiary. The rules regarding the kiddie tax are not applicable to a testamentary trust. Therefore income splitting amongst beneficiaries with the lowest tax brackets can occur. 7 Where multiple trusts have been created by the same settlor, they may be deemed to be one trust if substantially all property has been settled by one person and the same beneficiaries or class of beneficiaries are recipients under the trust agreement. (See s. 104(2) of the Act). This subsection was designed to prevent the creation of multiple testamentary trusts with the same beneficiaries in order to take advantage of the low rates of tax on low amounts of income. This is not an issue for inter vivos trusts, since the top rate of tax applies to them. (i) Tax-Free Rollover into a Testamentary Spouse Trust A testamentary spousal trust is subject to conditions under s. 70(6) of the Act. Like an inter vivos spousal trust, the spouse must be entitled to receive all of the income of the trust that arises before the spouse’s death and no person except the spouse may, before the spouse’s death, receive or otherwise obtain the use of any of the income or capital of the trust. With a testamentary spousal trust, the property must vest in the trust within 36 months after the death of the taxpayer. This time period can be extended where a written application is made to the Minister. If all of the requirements for a spousal trust are met, the property is transferred to the trust for proceeds equal to its tax cost. The trust is deemed to acquire the property at a cost equal to the tax cost of the property to the transferor. (Part 2 of this series will look at inter vivos and testamentary spousal trusts in the planning context). c) 21-year deemed disposition rule To prevent a trust from being used as an indefinite tax deferral vehicle s. 104(4) of the Act was designed to force trusts to recognize and pay tax on their accrued capital gains every 21 years. The trust is deemed to dispose of each capital property for proceeds equal to its fair market value and to have reacquired the property immediately after for an amount equal to that fair market value. In certain scenarios, the Act provides for a rollover of assets from a trust to beneficiaries on a tax-free basis. The 21-year deemed disposition rule does not apply to spousal, alter ego or joint partner trusts. In these types of trusts, the deemed disposition is deferred to the death of the contributor of the trust or the spouse, even where the 21 years is longer than the commencement date of the trust. Further planning opportunities in this regard will be discussed generally in the next Tax Topic in this series. As the 21-year deemed disposition rule applies to capital property only, and since life insurance is not considered to be capital property, this rule does not apply to life insurance held in an inter vivos trust. d) Tax Treatment of Distributions from a Trust Amounts which became payable to a beneficiary of an inter vivos or testamentary trust are included in the beneficiary’s income under s. 104(13) of the Act. The trust would receive a deduction from its income for amounts paid or payable to a beneficiary under s. 104(6) of the Act. e) Preferred Beneficiary Election Preferred beneficiary elections can be filed for both testamentary and inter vivos trusts. Pursuant to s. 104(14) of the Act, a joint election is filed that permits the income to be retained by the trust but to be taxed on the beneficiary’s tax return. The elected amount is deducted in computing the trust’s taxable income. (See s. 104(12) of the Act). S. 108(1) of the Act defines a “preferred beneficiary” to include an individual who has attained the age of 18 years old and is dependant as a result of being mentally or physically handicapped. The beneficiary can be a spouse (including same-sex partners), common-law partner, child, grandchild or great grandchild of the settlor. This planning allows the income that would otherwise be distributed to the beneficiary to accumulate in the trust. It also allows the preferred beneficiary to effectively utilize his or her personal exemption limit and to enjoy income up to that amount tax-free. This can also be beneficial in preventing the disabled individual from losing government disability benefits. f) Attribution and Revisionary Trust Rules The attribution rules have a significant impact on trust planning. Essentially, the rules state that income can be attributed back to the settlor upon certain transfers of property. This is the case when it appears that the transfer occurred primarily for the purposes of income splitting. The trust attribution rules found in s.74.3 will not apply unless s. 74.1 or 74.2 apply under the Act. The trust attribution rules will only be applicable if a beneficiary of the trust is a ”designated person” in respect of a person who has directly or indirectly lent or transferred property to the trust. A “designated 8 person” as defined under 74.5(5) means a spouse, non-arm’s length minor, or minor niece or nephew of the individual transferor or lender. Section 74.5 of the ITA provides, that a transfer for fair market value consideration will not cause s. 74.1(1) and (2) of the Act to apply. As well, section 74.4 (2) of the Act also must be considered. It relates to transfers and loans of property to a corporation where the intent is to reduce income of the transferor and benefit a named party. When a transfer is to occur involving family members and corporations special note must be taken of these sections to ensure that the proposed plan does not invoke the attribution rules. Subsection 75(2) of the Act pertains to the revisionary trust rules. If a person contributes property to a trust and the property is held in the trust subject to certain conditions, any income or capital gain from the contributed property is treated as income or capital gain of the contributor. Careful consideration of the revisionary trust rules must be considered and the impact these rules have on trust roll-outs under s. 107 (2) and (4.1). A full discussion of these issues is beyond the scope of this paper but should be considered and reviewed. Variations of trusts Generally, a court will be reluctant to vary the terms of a trust. Only in instances where it can be demonstrated that the variation will benefit the beneficiaries, will a court provide approval. Unless the trust agreement allows for a variation, provincial trustee legislation in most instances will require that a trustee seek approval from the court. Where the beneficiaries may agree as to the variation but a minor child is also a beneficiary, a court application to vary must be sought to ensure that the minor child’s interests are also considered. (See the Alberta case of Sadlemyer v. Royal Trust Co. of Canada, 2012 ABQB 241). A court will vary a trust where it is in keeping with the settlor’s intention - see Eaton v. Eaton-Kent 2013 ONSC 7985. A variation of a trust may also effectively terminate the original trust and create a new one. If this occurs, there will be a deemed disposition of all the trust property, which could result in a realization of taxable capital gains. Note should be taken that a variation of a trust may also cause the attribution rules to apply. Caution in that regard should be taken when seeking a variation of trust terms. Winding Up Generally a trust will be wound up pursuant to the wind up provisions in the trust document. Most trust documents contemplate a wind up of the trust within 21 years in order to avoid the deemed disposition rules. Where the trust document does not address this issue, provincial trustee legislation requires the trustee to seek court approval for a winding up of the trust. Where the beneficiaries and guardians of minor beneficiaries approve of the wind up, the court must be satisfied that it will be in the best interests of all of the beneficiaries to approve the winding up of the trust. The capital from a trust can be distributed to any Canadian resident beneficiary at its cost pursuant to s. 107(2) of the Act. This defers any capital gain until death of the beneficiary (unless disposed of prior to that by the beneficiary) unless the trust is revocable as set out in s. 75(2) of the Act. 9 Conclusion Trusts can provide a vehicle that allows for tax planning and control of assets. There are several issues that must be considered when creating a trust. Being aware of these issues can serve to better understand when a trust might be appropriate and when another planning tool might be considered. Part 2 of this Tax Topic discusses the various types of trusts when planning with life insurance. Last updated: April 2014 Tax, Retirement & Estate Planning Services at Manulife Financial writes various publications on an ongoing basis. This team of accountants, lawyers and insurance professionals provides specialized information about legal issues, accounting and life insurance and their link to complex tax and estate planning solutions. 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