Alter Ego Trusts
Advanced Estate Planning After Age 65
Most estate plans centre around a Will.
For many individuals, a carefully prepared Will is all that is required to ensure their estate is distributed according to their wishes.
However, for some individuals over the age of 65, another estate planning tool may be worth considering: an Alter Ego Trust.
While these trusts are not appropriate for everyone, they can offer important planning opportunities in the right circumstances.
What Is an Alter Ego Trust?
An Alter Ego Trust is a special type of trust available to individuals who are 65 years of age or older.
Generally speaking, a person transfers assets into the trust during their lifetime while continuing to retain the exclusive right to receive the income and benefit from those assets for the remainder of their life.
Unlike many other trusts, the person creating the trust continues to enjoy the property they have transferred into it.
Upon their death, the trust assets are distributed in accordance with the terms of the trust agreement rather than through their Will.
Why Might Someone Consider an Alter Ego Trust?
Depending upon an individual's circumstances, an Alter Ego Trust may offer several potential advantages.
These may include:
avoiding the need for probate with respect to assets held in the trust;
maintaining greater privacy, as trust documents do not generally become part of the probate process;
providing continuity in the management of assets in the event of incapacity;
assisting with the orderly administration of an estate; and
facilitating certain estate and tax planning objectives.
Whether these benefits outweigh the costs and complexity of establishing a trust will depend upon each person's circumstances.
Are Alter Ego Trusts Right for Everyone?
No.
Creating and administering an Alter Ego Trust involves legal, tax, and administrative considerations that may make it unnecessary for many individuals.
For many Ontarians, a properly prepared Will, Powers of Attorney, and beneficiary designations will provide an effective estate plan.
An Alter Ego Trust is generally considered only after reviewing an individual's assets, family circumstances, and long-term planning goals.
Professional Advice Is Essential
Because Alter Ego Trusts involve both legal and tax considerations, they should never be established without obtaining appropriate professional advice.
An estates lawyer can help determine whether an Alter Ego Trust forms part of a broader estate plan, while an accountant or tax advisor can provide guidance regarding the potential tax consequences.
Final Thoughts
Estate planning is not about using the most sophisticated planning tools available.
It is about using the right tools for your particular circumstances.
For some individuals over the age of 65, an Alter Ego Trust may provide flexibility, privacy, and continuity that a Will alone cannot achieve.
For others, a simpler estate plan may be entirely appropriate.
The key is developing a plan that reflects your assets, your family, and your long-term objectives.
If you are over the age of 65 and would like to discuss whether an Alter Ego Trust may be appropriate as part of your estate plan, Tonelli Estate Law would be pleased to assist - BOOK A FREE CONSULT TODAY.
This article is for general informational purposes only and does not constitute legal advice.
