Example: Charitable trusts
Raj wants to live in his house for the rest of his days, but he wants to donate the home — his principal residence — to the University of Calgary. By setting up this residual charitable trust, Raj will reduce his income taxes, continue enjoying his lifestyle and be able to stay in the house. The charitable trust lets Raj make a gift now and have no capital gains tax on the donation, as it is his principal residence.
Your art collection
Mary wants to donate her collection of art to the University of Calgary, but she wants the art to remain in her home so she can still enjoy it. So, she will transfer her artwork into a charitable trust now, give the University of Calgary a residual interest, and continue to be surrounded by her favourite paintings.
Your stocks and property
Philip wants to transfer stocks and some other capital property into a lifetime trust for him and his family, but names the University of Calgary as the remainder beneficiary. This helps Philip because his assets are professionally managed and he’s paid a fixed income from the assets, helping him save taxes and increase cash flow.
Once Philip sets up the trust, there is no encroachment allowed on the trust’s principle. It is an irrevocable transfer of assets, meaning the income and remainder.