Trusts are a tool that Canadians often use to organize their estates. Used correctly, the right trust or trusts can ease estate administration and lower tax or probate costs. In 2001, two new trusts became available to estate planners in Ontario and throughout Canada: alter ego and joint partner trusts.
These trusts are fairly similar. Through either of these trusts, settlors can transfer capital assets from their living trusts into one of these trusts under a few conditions. This transfer will be tax-deferred and the assets will transfer within the terms of the trust rather than through the estate.
There are various conditions that must be met to utilize these trust types. For example, the settlor must be at least 65 years of age when he or she creates the trust. The settlor must also have access to the trust income that is generated before he or she dies. Additionally, the majority of trustees must be Canadian. Using this kind of trust can help people save a great deal on probate fees, especially for those in provinces with higher fees like Ontario.
Besides probate savings, there may be other advantages to using alter ego and joint partner trusts. For example, trust deeds have more confidentiality than a probated will which can protect a person’s privacy. It can also speed up estate administration since the assets within the trust pass outside the estate. Trustees, estate planners and executors should familiarize themselves with the options available. A good first step is to work with an Ontario estate lawyer to understand the legalities associated with different estate planning and administration tools in the province.