Alter Ego Trust

Alter Ego Trust is a 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 alive. The reason it is called an Alter Ego Trust is because any assets you transfer to it are no longer held by you personally. Rather, the Trust holds the assets, and you hold and handle them in your capacity as Trustee, for your own benefit. An Alter Ego Trust operates much like a will in that, while the Trust Deed must state that only you are authorized the benefit of trust assets while you are alive, you get to issue who gets the trust assets after you pass away.  

 

In order to qualify as an AET and function properly under the rules in the Income Tax Act (the Act), the terms of the trust and the facts concerning the settlor must meet the following criteria:

 

• The trust must be settled by an individual who is at least 65 years of age at the time the trust is created

• The individual settling the trust and the trust itself must be resident in Canada, meaning that the trustee(s) and/or other legal representative(s) who exercise management and control over the trust must be resident in Canada;

• The settlor must be entitled to receive all of the income generated by the trust during their lifetime; and

• No one but the settlor is entitled to receive or otherwise use any of the trust’s income or capital during the settlor’s lifetime.

 

If you want to know if an Alter Ego Trust is right for you, speak with a will and estates attorney. If you are looking for a will and estates attorney around Kingston, ON, contact Fallow Estates Law. As your will and estates attorney, we combine creativity and skill when using legal tools to make our client's lives easier, to make the intergenerational transfer of wealth more seamless and to give clients peace of mind and control.

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