Trust accounts and in-trust accounts allow you to manage the money of a third party. They each have their own features and should not be mistaken for an actual trust.
Trust accounts and in-trust accounts allow you to deposit, manage and withdraw the money of a third party.
Therefore, a trust account or an in-trust account is one that you would open for your daughter, for example, to manage the money deposited into that account on her behalf. In this case, both your names would be tied to the account as follows: “Your name, on behalf of the account in the name of your child.”
Trust accounts are operated by liberal professions, such as lawyers and notaries, who use them to handle their clients’ funds.
For example, a notary would deposit the sum of a property sale into their trust account and then send the money to the seller once the required verifications have been completed.
Lawyers use trust accounts to deposit retainer fees and disbursements from their clients. Afterwards, they can transfer these sums to their administrative account once their work has been completed.
Trust accounts and in-trust accounts, however, should not be mistaken for actual trusts.
Actual trusts are subject to strict regulations that do not apply to trust accounts or in-trust accounts.
The deed is what grants legal standing to the trust. Creating an account must be followed by an irrevocable donation, such as a sum of bank bills, an ingot or a numbered coin.
“People think they have a trust because they opened a trust account, but that is not the case,” says François Archambault, Senior Advisor, Expert Centre at National Bank.
Trusts include testamentary trusts as well as trusts that can be created for a living person, which are called inter vivos trusts. You can create a trust if you’re an entrepreneur and want to divide your estate to reduce your tax burden, protect your assets or plan the succession of your business.
Trust accounts opened by lawyers and notaries are monitored by their respective professional orders. They ensure strict control over their members’ trust accounts.
A personal in-trust account isn’t subject to the same control. In this case, it’s actually the relationship of trust between the holder and the person named in the trust that takes precedence.
When it comes to the financial institution that houses the account, “the principle it uses is one of non-intervention. The institution has no business checking on the activities of their client’s account,” explains Marc Lacoursière, professor of banking law at Université Laval. “Of course, if the institution has any doubts and suspects questionable account activity, it must be vigilant and investigate what is going on.”
Regardless of the reason why you want to divide your capital, it’s best to explore all your options with the help of a trust advisor.
Any reproduction, in whole or in part, is strictly prohibited without the prior written consent of National Bank of Canada.
The articles and information on this website are protected by the copyright laws in effect in Canada or other countries, as applicable. The copyrights on the articles and information belong to the National Bank of Canada or other persons. Any reproduction, redistribution, electronic communication, including indirectly via a hyperlink, in whole or in part, of these articles and information and any other use thereof that is not explicitly authorized is prohibited without the prior written consent of the copyright owner.
The contents of this website must not be interpreted, considered or used as if it were financial, legal, fiscal, or other advice. National Bank and its partners in contents will not be liable for any damages that you may incur from such use.
This article is provided by National Bank, its subsidiaries and group entities for information purposes only, and creates no legal or contractual obligation for National Bank, its subsidiaries and group entities. The details of this service offering and the conditions herein are subject to change.
The hyperlinks in this article may redirect to external websites not administered by National Bank. The Bank cannot be held liable for the content of external websites or any damages caused by their use.
Views expressed in this article are those of the person being interviewed. They do not necessarily reflect the opinions of National Bank or its subsidiaries. For financial or business advice, please consult your National Bank advisor, financial planner or an industry professional (e.g., accountant, tax specialist or lawyer).