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The Joint Partner Trust or Alter Ego Trust

by Martin Zeidenberg


Martin K. Zeidenberg

OVER AGE 65? READ ON

There is a method that is now being used by Estate Planners to avoid probate taxes respecting any principal residence that has significant value at the date of death. By creating a Joint Partner Trust or Alter Ego Trust (single individual) to own the property, all of the benefits of principal residence exemptions under the Income Tax Act remain, and the property, no longer being owned by an individual at the date of death, is now sheltered from probate costs.

The basis of this Trust would be to move the ownership of your principal residence property to a Trust during your lifetime so that you would be the only parties able to receive income or capital from this Trust. Obviously, while it remains your principal residence, there would be no income created, but if it was sold the proceeds of the sale
and any replacement home would remain assets of the Trust. You would be the only party or parties who could receive the income or the capital from proceeds of sale held by the Trust.

This type of Trust maintains the principal residence exemption so any gain in the ownership value of the property would continue to be sheltered from income taxes. There would be no Land Transfer Tax to transfer the property into this Trust. Most importantly, since the Trust would own the residence, on the last of you to die you would not own the property, so that there would be no value included on a probate application and accordingly the property would not be subject to probate taxes under the Estates Administration Tax Act.

On the last of you to die, the trust assets would flow out simply in accordance with whatever testamentary distribution you wish to make of the home or the proceeds and/or any replacement home after the original home had been sold. We would reflect the same language contained in your Wills as to disposition of your home on death. In order to qualify for the use of this Trust you must be 65 years of age.

As to the probate savings, if for example, the property is currently worth:

a. $1,500,000.00 with no mortgage encumbrance the probate tax to be avoided on your death under those numbers as our reference, would be $21,750.00.
b. $2,000,000.00 with no mortgage encumbrance the probate tax to be avoided on your death under those numbers as our reference, would be $29,250.00.
Other Assets could be added to the trust at any time, including non-principal residence properties but any such additions should be made in consultation with your Accountant.

If you find this of interest I would look forward to discussing same with you.

Contact Martin Zeidenberg by email at mkz@gzlegal.com or by phone at 1.416.642.5402.

Practice Areas: Wills & Estates, Estate Administration, Trusts, Corporate Commercial

© Martin Zeidenberg, 2021

This item is provided for general information purposes only and is not intended to be relied upon as legal advice. Informed legal advice should always be obtained about your specific circumstances.

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