Tax & Estate Planning

Alter-ego and Joint Partner Trusts

By July 19, 2017 January 7th, 2020 No Comments
Tax & Estate Planning

Alter-ego and Joint Partner Trusts

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Alter-ego trusts and joint partner trusts are special types of revocable inter vivos trusts, which, if correctly structured in accordance with our tax rules, enable you to transfer the property to them on a rollover basis.

An alter-ego trust is a trust you can create while you are alive, but not until you are 65 or older. In order for the trust to qualify for the alter-ego status, you must be entitled to receive all of the income, and no one except you may receive any income or capital until you die. The advantage of a trust having such status is that you can transfer property to it on a rollover basis. The contingent capital beneficiaries can be anyone you choose to inherit your property.

A rollover treatment also applies to transfer to a joint partner trust. This trust mirrors the alter-ego trust requirements, except that both you and your spouse are permitted beneficiaries. Like the alter-ego trust, capital beneficiaries can be other than you or your spouse. This will also determine who will inherit your property.

The principal advantages of the alter-ego and joint partner trusts are that probate fees are avoided. They are also much less likely to be challenged compared with a will. For this reason they work well in a complicated second marriage situation.

The normal probate process forces you to publish your financial position to the world at a large, and in particular to potentially disgruntled or disinherited successors. With the alter-ego and joint partner trusts, probate and the publication requirements are both avoided. If all of your property is transferred to these vehicles, they also eliminate the need for a power of attorney. This is because you manage nothing, as the management is carried out by your trustee(s).

Invitation for Discussion:

If you would like to discuss this article in greater detail, or any other business law matter, please do not hesitate to contact one of the lawyers in the Tax group at Nerland Lindsey LLP.


Note that the foregoing is for general discussion purposes only and should not be construed as legal advice to any one person or company. If the issues discussed herein affect you or your company, you are encouraged to seek proper legal advice.

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