It is the time of the year where age-old traditions are celebrated. Traditionally, a will is used to distribute assets at death. While a will serves the purpose there may be reasons for you to look at an alternative way to distribute assets such as an alter ego trust.
An alter ego trust can be established and assets transferred to it tax free provided you are age 65 or older, the trust is created after 1999, and you are the only person entitled to receive income or capital from the trust during your lifetime.
Two benefits of an alter ego trust include:
• Less probate – assets passing by will may be subject to probate fees whereas assets held in an alter ego trust pass according to the terms of the trust and bypass probate.
• Confidentiality – a probate application is a public document which can be viewed by anyone for a small fee. Assets (and the distribution scheme) held in an alter ego trust do not become public information at death.
As with many good things, one size does not fit all. The income from assets left in an alter-ego trust for the benefit of others is taxed at the top marginal tax rate and not graduated rates as previously discussed in this forum.
Perhaps it’s time to consider an alter ego trust as a will alternative.
Derek de Gannes