Alter Ego and Joint Partner Trusts: Tax Rules, Probate and Estate Claims

For clients aged 65 and older, alter ego and joint partner trusts can provide continuity when capacity is lost or a spouse dies. They can also offer privacy and reduce the need for probate. Those benefits depend on how the trust is drafted, funded and administered, and they do not place its assets beyond every estate or creditor claim. 

Raymond M. Loucks, CPA, CA, TEP, FEA, of Tranquility Tax Solutions and Elyssa L. Lockhart, JD, of MLT Aikins examine the tax rules and practical decisions behind these trusts. They cover the rollover on transferring property into a trust, the deemed disposition on death, the 21-year rule, attribution, the loss of trust-level lifetime capital gains exemption eligibility and trust reporting requirements.

The discussion also considers probate costs across provinces, planning for blended families, continuity during incapacity and the limits of protection against claims by spouses, dependants and creditors. A closing checklist highlights issues to resolve before assets are transferred into a trust.