March 7, 2014 - Advisor.ca


The Expert

Robert Mendenhall, Vice President, Tax & Estate Planning, Richardson GMP Ltd.


Client Profile

Elsa Koertig, 48, is a single mom and schoolteacher in Moose Jaw, Sask. She earns $65,000 annually and her daughter Ingrid is heading to university.

Ingrid’s straight As and clean sweep of provincial and national science fairs caught the attention of Ivy League schools, and her heart’s set on Princeton. She’s earned generous scholarships, but even after factoring in RESPs, the family faces a $10,000 annual shortfall.

Elsa’s coming off a messy divorce and is saddled with mortgage, car and other debt payments. But if she could access the $100,000 stock-and-bond portfolio her deceased parents left her in trust, she’d be able to send Ingrid to Princeton.

Elsa’s foggy on the details. She knows how much is in the trust, and remembers her parents saying they wanted it to fund her retirement. Can she tap the trust sooner?

The Strategy

Examine the document, says Robert Mendenhall, vice president of tax and estate planning at Richardson GMP Ltd. Its terms may allow the trustee to distribute assets. “You don’t want to look at terminating the trust right off the bat. It would be a lot easier to talk to the trustee and have [him or her] exercise that discretion.”

Also look for options to collapse the trust. “If the trustee’s allowed to terminate [it] and give the funds to the beneficiary, then all that’s needed is to convince the trustee that this is the right thing to do,” notes Mendenhall. Unfortunately Elsa’s parents gave the trustee no discretion and there’s no termination provision. The document says Elsa can’t access the funds until she turns 65.

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