Why Using a DIY Trust Is Rarely a Good Idea
John and Mary were told that trusts are a smart way to protect assets, so they decided to move most of their assets into the trust.
They thought that moving everything into a trust would simplify things. In fact, it did the opposite.
Written By Tiffany Woodfield, Financial Advisor, TEP®, CRPC®, CIM®
Unfortunately, John and Mary created a do-it-yourself trust online without professional advice.
A professional would have advised them not to put everything in the trust.
The trust was not properly set up, and they triggered a taxable event when they transferred all their assets into it. The investment portfolio changed ownership from John to the trust, triggering a deemed disposition, which is a taxable event. A deemed disposition is when an asset is “deemed” to have been sold for tax purposes. When that happens, you owe tax on the capital gains.
In addition, John and Mary put their RRSPs into the trust.
Doing this didn’t make sense, as they already had named beneficiaries. They didn’t gain anything by putting the RRSPs in the trust.
Moreover, during their lifetime, the income earned from their non-registered investments was taxed at high rates. It could have been taxed more efficiently if it had been held in their personal names rather than in a trust.
This is a clear example of how getting the right advice is critical if you want to ensure you have a properly structured estate rather than a tax fiasco.
Trusts are complex, and your assets may not be the ideal fit.
On the other hand, if you have substantial assets and a complex estate, a trust may be critical. Without the right advice, you can easily make costly mistakes.
Why This Matters
Trusts are often discussed as if they automatically protect assets or reduce tax, but the outcome depends on where you live, where your beneficiaries live, the type of trust, how it is structured, and what is transferred into it.
For families in BC, moving appreciated investments or registered assets into a trust without understanding the consequences can create immediate and potentially irreversible costs. John and Mary’s experience shows exactly why planning should begin with the problem you need to solve.
In addition, it’s rarely a good idea to create a trust on your own without any professional guidance.
Planning That Was Missing
- Legal review of the trust structure
- Tax analysis before transferring assets
- Asset-by-asset suitability review
- Coordination of registered accounts and estate planning
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Read More:
💎 What Is the Purpose of a Trust in Estate Planning?
💎 When to Use a Trust for Estate Planning in Canada
About the Author
TIFFANY WOODFIELD is a senior financial advisor, estate-planning expert, and dual-licensed portfolio manager based in Kelowna, British Columbia. She is the co-founder of SWAN Wealth Management, where she helps Canadian and cross-border families build lasting wealth, reduce tax risk, and create meaningful legacies.
As a TEP (Trust and Estate Practitioner) and portfolio manager, Tiffany works closely with successful professionals, business owners, and internationally mobile families who want to enjoy a more flexible, work-optional lifestyle. She combines deep technical expertise in wealth management with a strong focus on mindset, personal development, and purposeful decision-making.
Tiffany has been a contributor to Bloomberg TV and has been featured in major national and international publications, including The Globe and Mail and Barron’s, for her insights on retirement planning, cross-border wealth issues, and estate planning.
Professional designations:
- TEP® – Trust and Estate Practitioner
- CRPC® – Chartered Retirement Planning Counselor
- CIM® – Chartered Investment Manager
*Names have been changed to protect the identity and privacy of the individuals in this story. Please seek the advice of professionals before taking action. This case study is for educational purposes only.