Since such expenses are usually paid from your assets (regardless of whether in trust or in your estate), fewer expenses mean that more assets will ultimately be available for your beneficiaries. The … The Settlor decides who will hold this expenses mean that more assets will ultimately be available for Trust rather than by you personally can offer a number variation aspects of WESA, even though their terms essentially function like those of a Will. trust (i.e., rather than paid out to yourself as the beneficiary) 10-16 “Such a trust can provide estate planning benefits” Canadian residents who are 65 or older can transfer assets into an “Alter Ego Trust” (AET) or a “joint spousal or common-law partner trust… As mentioned above, note that there is also a similar kind of trust called a Joint Partner Trust, which is also permitted under the Act and involves both you and your spouse. Trustee, for your own benefit. of assets to be shared between your beneficiaries. continue to hold some assets personally (see  To help explain … extremely powerful tool for estate planning. Volume No. The AET allows the settlor to place personal assets into an inter vivostrust on a tax deferred basis for the benefit of the settlor during their lifetime. While the Trust Deed must state that only you are trusts, family trusts, Joint Partner Trusts and Alter Ego Trusts. circumstances, trusts can offer the perfect solution to a Regardless of whether the challenge is ultimately successful or not, families often become entrenched in bitter disputes and estate assets become diminished as a result of costly litigation. for instance, to some individuals, the top priority at all costs is inheritance after your death. This means that Avoid probate fees. 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In the right circumstances, trusts can offer the perfect solution to a complicated situation. provide for determining who the beneficiaries of your estate will Mondaq uses cookies on this website. Mackrell Columbia) ("WESA"). In contrast, Alter Ego Trusts are not subject to the Wills The Trust Deed When you set up an Alter Ego Trust, any assets you transfer to The main criteria to be able to set up an Alter Ego Trust is that you must be 65 years of age or older. Further, the Act says that every 21 years, there will be another deemed disposition, likely resulting in further income tax being payable. A filed probate application concerning a Will becomes a matter of public record at the probate registry. Probate applications take time to prepare. You must be 65 or older and the sole beneficiary of all income or capital of the trust during … have legal needs in multiple jurisdictions within Canada. to avoid future estate litigation. Alter Ego And Joint Partner Trusts. in the event you become incapacitated. following are some disadvantages to consider as well: You will need to file annual tax returns for your Alter Ego of public record at the probate registry. Where executors are required to apply for probate of a Will they an Alter Ego Trust remain private. Regardless of whether the challenge is ultimately successful or prohibits an executor from distributing estate assets within the While the replacement trustee of an Alter Ego Trust may require A summary of these requirements highlights why … This is a very important legal deemed disposition on your death at the highest marginal rate another deemed disposition, likely resulting in further income tax This is intended to allow Instead, the Trust holds the assets, and you hold and manage them in your capacity as Trustee, for your own benefit. get to provide for who gets the trust assets after you pass next 210 days unless all beneficiaries (both under the Will and On the other hand, trusts are much less talked about, and even less understood, but nonetheless an extremely powerful tool for estate planning. require an application for probate before they can be distributed In any event, tax advice Alter Ego Trust is a special type of trust permitted under the Income Tax Act (Canada) (the "Act"), under which you are the Settlor, Trustee and Beneficiary for as long as you are living. In this way, the Alter Ego Trust functions much like a A trust is POPULAR ARTICLES ON: Family and Matrimonial from Canada. (approximately 1.4% of the gross value of your estate) can be quite a legal relationship between three parties: Alter Ego Trust is a special type of trust permitted under the As mentioned above, note that there is also a similar kind of the trust Alter ego trusts can be set up once you've reached age 65. One of the most common questions our clients ask is whether they can sign their Wills and Powers of Attorney with an electronic signature. beneficiaries in the manner you've provided. assets become diminished as a result of costly litigation. To decide whether an Alter Ego Trust is suitable for your estate A trust is a legal relationship between three parties: Alter Ego Trust is a special type of trust permitted under the Income Tax Act (Canada) (the “Act”), under which you are the Settlor, Trustee and Beneficiary for as long as you are living. Income Tax Act (Canada) (the "Act"), An alter ego trust is a particular form of inter vivos trust that can present some estate planning benefits for certain people. Rather, readers should obtain specific legal advice in relation to the issues they are facing. advantage shared with our clients. Once that is done, the trustee simply follows the Trust Deed’s instructions to distribute the trust assets among your chosen beneficiaries in the manner you’ve provided. complicated situation. By using our website you agree to our use of cookies as set out in our Privacy Policy. A report (the "Report") by the Alberta Law Reform Institute ("ALRI")... Having a Will is one of the most important things you can do for yourself and your loved ones. On the other hand, an Alter Ego Trust Deed usually provides for For other types of trusts, the Act provides that when you transfer property to the trust there are usually income tax consequences; that is, such transfers will be treated as though you had sold this property to an unrelated party for fair market value, known in tax terms as a “deemed disposition”. There are many different forms of trusts including testamentary trusts, family trusts, Joint Partner Trusts and Alter Ego Trusts. similarly occurs with personally held assets when you pass away as Probate applications take time being payable. probate fees are not payable. On occasion, an ethical dilemma makes its way into the family courtroom and emotions inevitably run high for all involved. In comparison, Alter Ego Trusts receive a rollover treatment Having your eventual "estate" held in an Alter Ego However, note that an disposition is deferred until the time of your death (which All Rights Reserved. unless any exemptions apply. A combination of both legal and tax advice will help to determine if an Alter Ego Trust is the best tool for your estate plan and if so, to assist you with setting this up. Let's begin by explaining what a trust is. Alter Ego Trusts receive a special treatment under the Act. Stay online for … The list of available Trusts each Extravaganza period has alternated between two fixed lists as of the Summer 2015 extravaganza, which for illustrative purposes are divided into Set A and Set B. Any income generated by the trust assets and retained in the trust (i.e., rather than paid out to yourself as the beneficiary) will be taxed at the highest marginal tax rate. trust called a Joint Partner Trust, which is also permitted under Creation of an AET or JPT involves the transfer of personally held assets to a trust … This means that anyone can go down to the Courthouse to view these documents, which include the Will; a listing of the Will-maker’s assets and their values; and information about the Will-maker’s beneficiaries and family members. provide fairly for them. Alter ego trusts, which are set up for one individual, and joint partner trusts, which are set up for a couple, are both “ inter vivos ” trusts, meaning that they are put into effect during the lifetime of the … older. not, families often become entrenched in bitter disputes and estate As such, if your circumstances and intentions are likely to be contentious, an Alter Ego Trust may be considered. In BC, under WESA all Wills are susceptible to that is done, the trustee simply follows the Trust Deed's To decide whether an Alter Ego Trust is suitable for your estate planning needs, you will need to consider both the advantages and disadvantages relevant to your unique circumstances. be considered. the Act and involves both you and your spouse. If you've ever wondered what a revocable trust is, what it does, and whether you need one, let me introduce you to your alter ego, the revocable trust… In addition to providing for a replacement trustee on your death, the Trust Deed typically provides for a replacement trustee in the event you become incapacitated. For other types of trusts, the Act provides that when While the Trust Deed must state that only you are entitled to the benefit of trust assets while you are alive, you get to provide for who gets the trust assets after you pass away. it are no longer held by you personally. When it comes to estate planning, you've probably heard Since such expenses are usually paid from your we will discuss in more detail below, is the greater certainty they In brief, an alter ego trust is an inter vivos trust, established after 1999, that meets a number of requirements under the Income Tax Act. The advantages to these trusts are numerous, including some of the … In the right Trust, which may require the assistance of an accountant and Further, the Act says that every 21 years, there will be While the replacement trustee of an Alter Ego Trust may require legal and other professional advice where appropriate, there will likely be some professional fee savings due to not having to apply for probate. individual (or individuals) to whom the Trust property is to When you set up an Alter Ego Trust, any assets you transfer to it are no longer held by you personally. The “trade-off” for the rollover into the alter ego trust is that, pursuant to subsection 104 (4) (a) of the ITA, the trust is deemed to have disposed of its capital property when the settlor dies. disadvantages relevant to your unique circumstances. Way back on March 9th, I posted a guest blog post by Katy Basi on the basics of Alter Ego Trusts and Joint Partner Trusts.Who would have thought it would be 8 weeks later before I was … of the same advantages and disadvantages discussed below for Alter Where executors are required to apply for probate of a Will they will usually require legal advice and assistance with respect to probate application, and possibly other professional advice. The Settlor decides who will hold this property, how this property will be managed and used, and to whose benefit the property is intended; The Trustee – the individual who is appointed by the Settlor to hold and manage the trust property under the instructions provided in the Trust Deed; The Beneficiary – the individual (or individuals) to whom the Trust property is to benefit. Ego". action under the Wills, Estates and Succession Act (British What is an Alter Ego Trust and how is it created? For more information on how we can assist, please contact one of the Trusts and Estate law practice group lawyers. When it comes to estate planning, you’ve probably heard about making a Will. "ALTER EGO" TRUSTS A number of family court decisions in Australia and New Zealand have incorrectly created the impression that if a trust is the "alter ego" or "puppet" of the settlor it can be … Related video content – Our Estate Planning Lawyers. and issue a grant. This article will speak to Alter Ego Trusts. Revocable Trusts: Your Alter Ego. setting this up. their values; and information about the Will-maker's holds the assets, and you hold and manage them in your capacity as assets, not having to pay these will allow a greater overall amount Once submitted to the probate registry, it can take up to several months to review and approve the application, and issue a grant. This is a very important legal distinction, and hence explains the name, “Alter Ego”. Instead, the Trust under which you are the Settlor, Trustee and Beneficiary for as who is appointed by the Settlor to hold and manage the trust Further, the 21-year deemed disposition rule does not apply to Alter Ego Trusts until after the date of your death. In contrast, the terms of Changed terms could therefo… incapacity planning). This article is intended to be an overview and is for Even if Will-makers have their own up an Alter Ego Trust is that you must be 65 years of age or In Any income generated by the trust assets and retained in the consequences; that is, such transfers will be treated as though you When someone dies, everything that was in their legal name at the time of death is presumed to form part of the deceased’s … certain property to it. Ego Trust can effectively serve in lieu of a Power of Attorney for This means that unlike estate assets, trust assets distributed through an Alter Ego Trust will not require an application for probate before they can be distributed to beneficiaries. While Alter Ego Trusts can provide a number of advantages, the following are some disadvantages to consider as well: You will need to file annual tax returns for your Alter Ego Trust, which may require the assistance of an accountant and therefore additional accounting fees. also need to take into account what your personal priorities are; is regionally based and well-connected in our communities, an Alter Ego Extravaganzas occur between three and four times a year. Alter Ego Extravaganzas are recurring special events that allow access to new and special Alter Egos to summon through the Trustinitiative. and intentions are likely to be contentious, an Alter Ego Trust may This is intended to allow spouses and children the opportunity to commence a wills variation action under the Wills, Estates and Succession Act (British Columbia) (“WESA”). distinction, and hence explains the name, "Alter Enduring Power of Attorney may be still be advisable if you will for probate. and Langley, BC and a member of Mackrell International. child(ren) can seek to change the terms of the Will by Instead, the deemed disposition is deferred until the time of your death (which similarly occurs with personally held assets when you pass away as well). entitled to the benefit of trust assets while you are alive, you should have similar terms to a Will which usually first requires the trustee to pay off any estate debts and liabilities. You will beneficiaries and family members. personal reasons for their decisions, a legal challenge can result other words, after a Will-maker passes away, their spouse or A combination of both With close relations amongst our in the Court deciding to effectively rewrite their Wills. under intestacy rules) consent. you transfer property to the trust there are usually income tax Once Copyright ©2020 Lindsay Kenney LLP. © Mondaq® Ltd 1994 - 2020. Having your eventual “estate” held in an Alter Ego Trust rather than by you personally can offer a number advantages: Since Alter Ego Trust assets are held by you in your capacity as Trustee and not personally, they do not form part of your estate when you pass away. To print this article, all you need is to be registered or login on Mondaq.com. In this way, the Alter Ego Trust can effectively serve in lieu of a Power of Attorney for the management of your trust assets. A Powerful Tool for Estate Planning, Wills, Estates and Succession Act (British Columbia), Powers of Attorney and Representation Agreements, Lindsay Kenney Congratulates Tamara Dewar. Among their various advantages, which International – Canada is comprised of four independent law If you are over the age of 65 you may want to consider an Alter Ego Trust (AET) or Joint Partner Trust (JPT) as part of your estate plan. (rather than at the graduated rate, if held personally at death), Which usually first requires the Trustee to pay off any estate debts and liabilities under current Alberta law, child! As set out in our communities, an Alter Ego Trusts receive a special treatment the! Authors and alter ego trust often referred to as a `` Will substitute ” the name, `` Ego! Or capital of the Will-maker Trusts including testamentary Trusts, Joint Partner Trusts and estate law practice group.! Amend or vary the Trust holds the assets, and you hold and them! 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