Just a Minute - Podcast Episode 27: Alter Ego Trusts, an Estate Planning Strategy for Seniors Part 2

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[00:10] Welcome to a new episode of "Just a Minute" by Landmark Law. Today's episode is presented to you by Vicki on May 12th, 2023, to help educate our listeners on various legal scenarios.

[00:24] Today's episode will be Part 2 on Alter Ego Trusts, an Estate Planning Strategy for Seniors.

[00:29] Due to Ontario having one of the highest estate administration taxes in North America, 1.5% on the majority of your probated estate, the use of trusts and dual wills are popular estate planning tools to gift some more to your loved ones.

[00:45] In order to create an alter ego trust,

[00:47] the settlor must be at least 65 years of age, and a resident of Canada;

[00:52] the settlor must be able to receive all the income of the trust that arises before his or her death, and no one except the settlor, may before his or her death, receive or obtain the use of any income or capital of the trust; and the trust does not make an election regarding deemed disposition,

[01:10] subparagraph 104 of the Income Tax Act. It should be noted that an intervivos trust, such as alter ego trusts, are subject to income tax at the top marginal tax rate.

[01:22] When transferring assets to trustees, the settlor loses control over them, and it may be prudent to appoint themselves as one of the trustees to retain some control. On the death of the settlor, there's a deemed disposition of the assets that are in the trust and capital gains taxes cannot be set against the settlor's capital losses or capital losses in the trust can't be set against the settlor's capital gains.

[01:45] However, for tax-related matters, you must also seek advice from your accountant. Landmark Law Professional Corporation may assist in the preparation of your trust and Estate planning matters.