About Alter Ego Trusts and Joint Partner Trusts
Both alter ego and joint partner trusts are “inter vivos” trusts, meaning you transfer your assets into the trust during your lifetime. After it is set up, you would have assets in the trust, and assets still held by you personally. The assets in trust would pass according to the trust document, and your personal assets would pass by your will, or otherwise by joint ownership or beneficiary designation. Both these trusts have basically the same concept, benefits and drawbacks. The difference is that an alter ego trust is for one person, whereas a joint partner trust is for married or common law couples. Joint Partner Trusts (JPT) are often called Joint Spousal Trusts (JST).
Qualification
To be able to qualify for one of these trusts, you must be:
- 65 or older
- entitled to receive all of the income from the trust
- the only person (or people for spouses) entitled to receive or have use of the income or capital of the trust
- a resident of Canada
- Westcoast Wills & Estates tends to recommend these trusts only to those with an estate worth over roughly $2 million if the sole reason for setting up the trust is to avoid probate. The probate fee on $2 million is roughly $28,000. There are other reasons for setting up these trusts though.
Benefits:
- No probate fee on the assets in the trust (in BC, the probate fee is roughly 1.4% of the total value of your assets)
- Eliminate the probate process for the assets held in trust (the probate process can often take well over a year)
- Privacy (no third party will know what assets are in the trust, whereas probate filings are public for assets passing by wills)
- Can maintain the Principal Residence Exemption for homes transferred into the trust
- Some usefulness for disinheritance situations (discuss this with our trust lawyers, as care must be taken)
Drawbacks
- Added complexity to your life
- The trust may need to file annual tax returns
- More expensive than a will to set up (although the savings of probate fees more than justify this expense in the long-run)
- Possible negative tax consequences for improperly managed trusts on the year of death
- Expensive to add real estate to these trusts recently
Next Steps:
If you are unsure if setting up this type of trust is right for you, the experienced trust lawyers at Westcoast Wills & Estates can answer all of your questions. We routinely provide clients with the advice needed to decide. These trusts are usually complimented by basic Wills, Powers of Attorney and Representation Agreements
Contact an alter ego trust and joint partner trust lawyer in Vancouver, North Vancouver, Burnaby, or Squamish.
