What Is a Living Trust in BC?

What Is a Living Trust? 

A living trust is a legal tool created during the settlor’s lifetime.

The settlor is the person who makes the trust. They transfer the assets and title of the assets into the trust to be managed by a trustee for designated beneficiaries.  

When set up correctly, the assets held in the trust do not form part of the deceased’s estate and therefore do not go through probate. This avoidance of probate is particularly important because of the Wills, Estates and Succession Act of British Columbia (WESA). 

This provincial law grants spouses and children greater authority to challenge a will if they believe it is unfair.  If the will is contested, the courts can intervene and vary the terms of the will if they deem that family members aren’t adequately provided for. In contrast, most other provinces require a spouse or child to prove dependency to contest a will. A living trust can help protect against this because the assets held in the trust are separate from the will and do not generally form part of the deceased’s estate.

Written By Tiffany Woodfield, Financial Advisor, TEP®, CRPC®, CIM®

Table of Contents

1. How Does a Living Trust Work in BC?
2. What Is the Purpose of a Living Trust?
3. Who Needs a Living Trust?
4. What Are the Pros and Cons of a Living Trust?
5. How Much Does It Cost to Set Up a Living Trust in BC?
6. What Are the Major Pitfalls to Avoid When Creating a Living Trust?
7. Who Needs to Be Involved When Setting Up a Living Trust?
8. How Emotions Influence Living Trust Decisions

How Does a Living Trust Work in BC?

In BC, a living trust is a legal arrangement in which you transfer ownership of certain assets, such as investments or property, to a trust while you are still alive.  These assets are then managed by a trustee in accordance with the trust document for specified beneficiaries.  

The main benefit of a trust in BC is that when you pass away, the assets in the trust can be distributed without going through probate.  A trust helps ensure that your wishes for your assets are followed. 

What Is the Purpose of a Living Trust? 

A living trust, also referred to as an inter vivos trust, provides you with more control over your assets during your lifetime and creates greater flexibility in how your wealth is distributed after your death.

In addition, because a trust doesn’t go through probate, you avoid the complications of potential dependence relief claims and can have increased privacy and peace of mind that your wishes will be followed. 

Living trusts can also provide financial management for individuals who may become incapacitated. 

Who Needs a Living Trust?

Individuals who may need a living trust include those with complex family situations, blended families, or specific wishes regarding asset distribution.  

Parents with minor children or significant assets may also consider a living trust.  Often, a living trust can create opportunities to maintain control over how assets are managed and when they are distributed.  A living trust can create tax efficiency for significant assets such as businesses and real estate. 

What Are the Pros and Cons of a Living Trust? 

Living trusts offer major benefits such as:

• Flexibility and control for asset distribution
• Avoiding probate
• Maintaining privacy
• Added protection for minors or vulnerable adults
• Reduction of potential challenges for dependent relief through WESA
• Tax advantages when utilized properly

The cons of living trusts are:

• High setup costs and administration costs
• Ongoing tax filing 
• Loss of control of assets in the trust
• Increased complexity
• Potential complications because of TOSI and attribution rules
• Income in the trust is taxed at the highest marginal rate unless distributed

How Much Does It Cost to Set Up a Living Trust in BC? 

The cost to establish a living trust varies depending on the trust’s complexity and the professional services required. 

What adds to complexity, and thus costs, are the assets, family situations, and international exposure. Typically, legal fees for creating a simple living trust can range from $2,000 to $3,000. 

If the trust involves more complex assets or specific conditions, the costs would increase to $5,000 to $10,000 or more. Additionally, there may be ongoing administrative costs associated with managing the trust. 

It’s always a good idea to consult with a lawyer and your financial advisor to get an accurate estimate based on your specific situation.

What Are the Major Pitfalls to Avoid When Creating a Living Trust? 

When creating a living trust in British Columbia, one major pitfall to avoid is failing to transfer assets into the trust after its creation.

If assets aren’t titled correctly in the name of the trust, they won’t be managed according to the trust’s terms. Another common mistake is failing to clearly outline the distribution rules for beneficiaries, which can lead to disputes and confusion after the settlor’s death. 

In addition, it’s essential to select a trustee and a successor trustee who are financially competent, unbiased, and understand your wishes. 

Not selecting the right trustee can be a major pitfall. 

Overlooking tax implications or failing to consult a professional can result in unforeseen costs or complications. Finally, it’s crucial to regularly update the trust to reflect changes in personal circumstances, such as marriage, divorce, or the birth of children. 

The main pitfalls or errors that occur when creating a trust in BC are as follows:

• Not transferring assets into the trust
• Assets not titled in the trust’s name
• Unclear beneficiary distribution rules
• Poorly chosen trustee
• No successor trustee in place
• Trustee lacks financial skill or neutrality
• Ignoring tax implications
• Not consulting a professional
• Failing to update the trust over time
• Failing to update the trust after life changes

Who Needs to Be Involved When Setting Up a Living Trust?

When setting up a living trust, you need a settlor, who creates the trust; a trustee, who manages the assets; and beneficiaries, who will benefit from the income or capital in the trust.  You also need professional advice from lawyers, accountants, and financial advisors.  

These professionals ensure that the trust is set up correctly and is compliant with current laws. 

How Emotions Influence Living Trust Decisions

When people think about living trusts, they often focus on technical questions: taxes, probate, legal structure, and cost. 

Those details matter. But in practice, many living trust decisions are shaped just as much by emotion as by logic.

People frequently avoid estate planning out of fear — fear of taxes, fear of making the wrong choice, or fear of confronting difficult family dynamics. Others create overly complex trust structures because they seek certainty or control, without first asking whether those structures truly align with how they want their family to live and interact.

A living trust is a powerful tool, but it should support your life and values, not control them.

A Common Pattern in High-Net-Worth Decisions

I recently worked with a woman in her 80s who had more than enough money to comfortably support her lifestyle for the rest of her life.

She was considering moving to a place she loved, closer to family and a community that shared her values. The hesitation she had wasn’t financial capacity. Instead, it was tax-related. Moving would trigger a significant capital gains tax. By delaying the move and spreading the gain over several years, she could reduce the tax bill.

From a purely technical perspective, delaying made sense. But the real cost of that decision was time — time she could not get back.

She could easily afford the tax, but fear of making a “suboptimal” financial decision nearly caused her to postpone something deeply important to her.

This same pattern often shows up in living trust and estate planning decisions. 

Some people delay transferring assets into a trust to avoid immediate tax consequences, without fully considering the emotional and administrative burden this may place on their family later. Others focus so heavily on minimizing tax that they lose sight of what they actually want their estate plan to accomplish.

Why Clarity Matters More Than Optimization

The one thing none of us can create more of is time — not just time itself, but time spent living the way we want.

When estate planning decisions are made without clarity about what matters most, people often default to following generic or standardized advice, even if it is in conflict with their values or intentions.

If you start with strategy instead of purpose, money begins to control the decision. Plans get delayed. Structures become unnecessarily complex. Opportunities for peace of mind and family harmony are missed.

A living trust should not be created simply because it is “efficient” or “tax-effective.” 

It should exist because it supports how you want your assets managed, how your beneficiaries are protected, and how your family is cared for over time.

Making Living Trust Decisions with Perspective

When you’re clear on what matters most to you, technical planning becomes easier. 

Professionals can run the numbers, model different scenarios, and explain the tax implications of each option. From there, you can choose a structure and assess whether you need a living trust or not. You can ensure that your decision aligns with your goals, values, and family situation.

This approach often leads to better outcomes than focusing solely on minimizing tax or avoiding probate at all costs. In many cases, tools such as charitable giving can also be incorporated to reduce taxes while staying aligned with personal priorities.

A Final Thought

True financial freedom is not about accumulating or preserving wealth at all costs.

It comes from understanding what you value and using money as a tool to support that life. Money or preventing taxation isn’t the goal.

When approaching estate planning and deciding whether a living trust is right for you, try to step back from fear-based decision-making. With clarity, professional guidance, and a focus on what truly matters, your estate plan can reflect more than financial efficiency. Instead, it can reflect intention, care, and peace of mind.

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Read More:

💎 When to Use a Trust for Estate Planning in Canada

💎 What Is the Purpose of a Trust in Estate Planning? 

💎 What Is Estate Planning in Canada?

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