David A. Altro and Heela Donsky recently wrote an article which appeared on Advisor.ca and in the Advisor’s Edge magazine. In the article, David and Heela explain the impact of new trust rules for US citizens living in Canada.

Click here to view the article online or scroll down to read and excerpt of the piece.

New Trust Rules Impact US Citizens in Canada

ADVISOR.CA & Advisor’s Edge
April 2015


New Canadian tax rules taking effect in 2016 may disrupt estate plans that use spousal, alter ego or joint-partner trusts (see “Ottawa overhauls trust rules,”). Here, we’ll examine their impact on U.S. citizens living in Canada.

Alter ego and joint-partner trusts

An alter ego trust (AET) can be useful for a Canadian resident 65 or older seeking to avoid probate on the transfer of assets following death. The trust can essentially be used as substitute for a will.

Joint-partner trusts (JPT) are similar, but they only apply to spouses, both married and common law. (Unless otherwise noted, references to AETs include JPTs.) The 21-year deemed disposition that applies to inter vivos trusts doesn’t apply to AETs; so, if the settlor establishes an AET at 65 and lives past 86, there’s no deemed disposition. Instead, the disposition is triggered by the settlor’s death, unless the settlor of an AET (but not a JPT) elects to have the 21-year rule apply, with the year the trust is established as year 1. This election would prevent the settlor from transferring property to the trust on a tax-deferred basis.