Frequently Asked Questions

General Questions

Q: I have a legal problem, but I don’t know which lawyer to ask for. What should I do?

A: Call us at 250-385-1383 or toll free at 1-888-385-1383 and explain briefly what kind of problem you are having. Our reception will forward you to the right lawyer who can assist you.

Q: I would like to meet with a lawyer. How much will it cost?

A: We offer an initial telephone consultation at no charge. During that time, we listen as you outline your situation and offer you advice on whether you have an issue that requires legal representation. If you require our services, we will then discuss your options and our fee structure so that you can make an informed choice.

Q: What is your fee structure?

A: We offer a range of fee structures depending on the type of legal problem that you have. Generally, we require a retainer which is a deposit you make to our trust account. As we work on your file, we are able to deduct our legal fees and disbursements from that deposit. The size of the retainer that we request depends on the type of legal services you need and the specific facts of your case.

Our legal fees are comprised of the work performed by our lawyers on an hourly basis as well as disbursements, which include taxes, filing fees, long distance charges, photocopying charges, courier fees, and other fees charged to us in the course of our work for you.

Q: What is a contingency fee?

A: A contingency fee allows us to work on your matter and not charge you legal fees until we receive money on your behalf. In these types of matters, because we are assuming some of the risk of recovering money on your behalf, we will negotiate with you what percentage of recovery we will take as our “contingent” fee. However, even when we take a matter on a contingency fee basis, you will remain responsible for payment of disbursements incurred on your behalf.

We offer contingency fee arrangements in some personal injury and civil litigation matters, determined on a case-by-base basis. We do not offer contingency fee options for family law matters. We encourage you to contact us to discuss whether this option is right for you.

Q: How can I pay my legal bill?

A: We accept cash, credit cards and debit. Please contact us if you would like more information about our fees.

Q: What information does a lawyer need from me when we meet?

A: Your lawyer will need your identification, basic personal information, and any documents related to your issue. You should be prepared to describe the history of events in relation to your issue. We recommend that new clients prepare a chronology of events prior to the meeting.

Q: Where are you located?

A: We are located in the heart of Victoria, at the intersection of Douglas Street and Courtney Street. The first hour of parking is free at the City of Victoria parking lot located under the Main Branch of the Victoria Library.

Estate Planning Questions

Q: What is included in my estate?

A: Generally, assets that are in your name would be included in your estate. Exceptions include assets that you hold jointly with another (those assets will go to the surviving owner) and assets for which you are able to designate a beneficiary such as RRSPs and insurance policies. The dollar value of the assets actually in your name that are not held jointly or designated to a beneficiary form the assets that comprise your estate, and it is the dollar value of those assets that are used to calculate probate fees.

Q: What is “probate”?

A: Probate is the court order that is issued allowing your executor to execute the provisions of your will. Probate is the legal sanction to your executor to carry out the terms of your will and distribute your estate in the manner described in your will. Your executor requires a grant of probate before he or she can obtain control of a number of the assets in your estate including investments held in financial institutions, real estate and the like. Once the grant of probate is obtained, an executor can then proceed to liquidate the estate in preparation of distributing it as set forth by your will. If there are persons that are entitled to make a court application to vary your will, the executor must wait to distribute your estate, or obtain the consent of all those persons who are entitled to apply or named in the will to an earlier distribution. An executor must also obtain a clearance certificate from the Canada Revenue Agency before wholly distributing your estate.

Q: How much are probate fees in British Columbia?

A: Probate fees are calculated on the value of your estate, at date of death, in accordance with the following formula:

  • No fee if the estate is worth less than $25,000;

  • A basic fee of $208 if the estate is worth over $25,000;

  • A basic fee of $208 plus $6 per $1,000 (for a total of $358 for the first $50,000) if the estate is worth between $25,000 and $50,000;

  • $358 plus $14 per $1,000 of estate value over $50,000 if the estate is worth over $50,000.

These figures are current to November 2018 and are subject to change.

Q: What are the tax consequences of my death?

A: Following your death, your executor will be responsible for ensuring that your tax return for the calendar year in which you have died is prepared and filed. At the same time, your executor will also be required to file final tax return which effectively “closes your account” at the Canada Revenue Agency. This return will deal with any taxable dispositions that resulted from your death, such as capital gains that must be paid if you held any capital investments at the time of your passing. Following the filing of the final return, a clearance certificate is issued by the Canada Revenue Agency which then allows the executor to complete distribution of the estate. Executors can be held personally liable for ensuring that the tax returns are prepared accurately and the tax owing is paid.

Q: How long does it usually take to administer an estate?

A: This is one of the questions most frequently asked by executors and beneficiaries. At McConnan Bion O’Connor & Peterson we assist executors in preparing all the documentation necessary to obtain probate of the estate and thereafter to administer the estate in accordance with the terms of the will. The law requires that beneficiaries be notified in a certain manner, that they consent to certain steps being taken, and that those notifications and consents all be recorded and be in hand at the time application for probate is made. If a beneficiary does not return documents promptly or cannot be immediately located, that can lengthen the amount of time involved. Once an application for probate is made, it generally takes 6 to 8 weeks before the court issues the grant of probate. Once the court issues the grant of probate, estate assets can be liquidated and distributed among beneficiaries.

Family Law Questions

Q:  What is a cohabitation agreement?

A: A cohabitation agreement is a written agreement between people in a marriage-like relationship dealing with financial arrangements during the relationship or in the event of a relationship breakdown. A cohabitation agreement can be made between people who are not yet spouses (either married or common-law), or who are already married or common-law spouses. Generally, in order for a cohabitation agreement to be valid it must be in writing, witnessed, and signed. However, there are circumstances in which a cohabitation agreement, or parts of it, may not be valid. You should consult with a lawyer to ensure that your specific situation is properly addressed in a cohabitation agreement.

Q:  Do I need a cohabitation agreement?

A: You may benefit from a cohabitation agreement if any of the following apply to you:

  • There is property that you want to protect in the event of that your relationships ends (i.e.: inheritances, pensions, gifts, assets that you are bringing into the relationship, assets that you will acquire during the relationship, etc.);

  • This is not your first marriage or common-law relationship and you want to preserve your assets;

  • You want to preserve your assets for your children when you die;

  • You want to reach an agreement with your spouse about any possible future claims for spousal support in case the relationship ends;

  • You want to avoid an expensive and acrimonious separation if the relationship ends;

  • You want to set out how finances will be handled during your relationship;

  • You want to have a say as to “who keeps what” if the relationship ends.

The reality is that relationships do end, sometimes before we hope they might. A cohabitation agreement allows you and your partner to put a plan in place at a time when you feel secure in your relationship, which can be easier than reaching an agreement while a relationship is ending. A cohabitation agreement can also help you and your partner more easily resolve disputes arising from the end of your relationship, and limit the possibility of conflicts that need to be resolved in court. A carefully drafted cohabitation agreement, created with the advice of a lawyer, can be a very effective tool in helping you and your partner plan for the future.

Q: Why can’t I simply prepare my own cohabitation agreement or use a “do-it-yourself” kit?

A: If you prepare your own cohabitation agreement or using a “do-it-yourself” kit, there is a risk that:

  • The agreement may not be valid or enforceable;

  • The agreement may not say what you want it to say; and

  • The agreement may not do what you want it to do.

Family law is very complex. There is no boilerplate agreement that can be applied to every relationship. If you are making a cohabitation agreement, it is important to get legal advice to help you assess your particular situation, advise you on the law, and help you sort out what you should include in your agreement. We tailor and prepare agreements that apply to your situation.

Q:  How much will a cohabitation agreement cost?

A: It depends. Our family lawyers charge an hourly rate for preparing marriage or cohabitation agreements. If you are prepared and can provide your lawyer with complete information in an organized and timely manner, it will take your lawyer less time to assess your file and draft your agreement.

Q: Will you tell me if I don’t need a cohabitation agreement?

A: Some people fear that a lawyer may recommend that they go through the expense of getting a cohabitation agreement that they do not need. Whether you need a cohabitation agreement will depend entirely on your specific circumstances and concerns, and we will tell you if a cohabitation agreement does not make sense for you.

Q: What is a separation agreement?

A: A separation agreement is a private contract between you and your spouse settling any or all issues relating to the end of your relationship, such as:

  • Division of property;

  • Child or spousal support;

  • Parenting arrangements, such as:

    • With whom will your child reside?

    • How much time will your child spend with each parent?

    • Who will make decisions regarding your child’s education, health, religion, etc.?

Q: Why can’t my spouse and I simply prepare our own separation agreement at home or use a “do-it-yourself” kit?

A: The risks of preparing your own separation agreement or using a “do-it-yourself” kit are that:

  • It may not be valid or enforceable;

  • It may not say what you want it to say; and

  • It may not do what you want it to do.

Family law is very complex. There is no boilerplate agreement that can be applied to every relationship. If you are making a separation agreement, it is important to get legal advice to help you assess your particular situation, advise you on the law, and help you sort out what you should include in your agreement. We tailor and prepare agreements that apply to your situation.

Personal Planning Questions

Q: What is a power of attorney?

A: A power of attorney is a legal document that allows you to appoint someone to make financial and legal decisions for you.

There are two types of power of attorney: general and enduring.

A general power of attorney gives another person the ability to deal with your affairs while you still have the capacity to make decisions for yourself. For example, if you are on vacation, you can grant someone a power of attorney to deal with certain matters while you are away. A general power of attorney has the benefit of being relatively inexpensive and can be revoked at any time. Because it gives the other person significant control over your assets, a high degree of trust is required. Creating a general power of attorney does not protect your assets from the claims of creditors or other parties; it simply gives your attorney the power to deal with those assets on your behalf.

An enduring power of attorney is similar to a general power of attorney; however, an enduring power of attorney continues to operate even if you are no longer able to make decisions for yourself. To be an enduring power of attorney, the document must specifically provide that it is meant to continue operating if you become mentally incapacitated. It cannot be revoked once you are incapable of making decisions for yourself. As with a general power of attorney, it is very important to have a high degree of trust in the person to whom you grant an enduring power of attorney.

Q: What is a representation agreement?

A: A representation agreement is a legal document that allows you to appoint someone as your representative to make health and personal care decisions for you.

There are two types of representation agreement: a section 7 agreement and a section 9 agreement.

A section 7 agreement gives limited powers to a representative to deal with certain aspects of a person's estate and their personal needs. A section 7 agreement can be granted by a person who has diminished capacity.

A section 9 agreement can provide more detailed instructions regarding how you would like your representative to help you manage your health and personal care needs. A section 9 agreement can dictate under what circumstances your representative can act and what input they must seek from you and others in making decisions.

We encourage you to seek legal advice if you are contemplating a representation agreement, as a representation agreement may not be effective if it is improperly drafted.

Q: What is meant by mental “capacity” and “incapacity”?

A: The term “capacity” means the ability of a person to act freely and to understand fully the nature and effect of their actions. The term ”incapacity” means an inability to understand the nature and effect of your actions; an inability to exercise independent judgment. There are degrees of diminished capacity.

Q: Can a person who has diminished mental capacity sign a representation agreement?

A: A section 7 representation agreement signed can be made by an individual who has diminished capacity. A section 7 agreement allows a representative to make decisions with respect to simple financial matters, legal matters, health care and certain business or property matters. In this instance, if the person has sufficient capacity to communicate that they want a representative to assist in making certain decisions, if they have the ability to express certain preferences, and if they are aware of the nature of the agreement they are making to give authority to another person to make certain decisions on their behalf, and it is clear the individual trusts the person who is to be appointed a representative, then that person, even though they are of diminished mental capacity, can make a section 7 representation agreement.

Q: Is it advisable to transfer my assets into joint names with my children to avoid taxes and probate fees?

A: Transferring assets into joint tenancy (where you and anyone else owning the property own an equal, undivided interest in the property) has the benefit of being relatively inexpensive, ensuring that the property passes directly to the surviving joint tenant on death, and allowing you to maintain some control over the property because of your continued ownership interest in the property. However, there can be disadvantages to owning property in joint tenancy simply to avoid probate fees. Where one of the joint tenants becomes incapacitated, the joint tenancy will continue until one of the joint tenants dies. Because it is an absolute gift of one half of the property, there is a loss of some control - you cannot undo the transfer unless the recipient agrees to transfer their share back to you. The transfer of capital assets to joint tenancy is considered a disposition for tax purposes, and so may attract capital gains or other income tax consequences. Putting an asset into joint tenancy also exposes part of the asset to claims of the other person’s creditors. In the case of a child who has financial or marital difficulties, this can result in your asset being tied up as a result of those claims.

We recommend that you consult a lawyer if you are contemplating transferring an asset into joint tenancy for the purpose of minimizing tax consequences on your death.

Wills Questions

Q: What is a will?

A: A will is a legal document in which you provide written instructions with respect to the distribution of your property on and after death. A will must be in writing and must be signed by you in the presence of two adult witnesses. The witnesses should not be persons who are named as executors or beneficiaries in the will.

Q: What happens if I die without a will?

A: If you die without a will your estate will be administered and distributed in accordance with legislation, which provides a formula for the division of your estate between your spouse and surviving children. If you have no spouse or surviving children, your estate will be distributed among your surviving living relatives, by degrees of relationship. If you die leaving infant children, the Public Guardian and Trustee of British Columbia will be involved with the administration of the portion of your estate that goes to them.

Q: What are the advantages of having a will?

A: If you have a will, you are ensuring that your estate is being distributed to the persons that you want to receive your estate, not in accordance with the default rules set out in legislation. You also have the opportunity to name that person or company that you wish to act as executor of your estate - someone that you trust to make sure that your instructions are carried out according to your wishes. If you die without a will, the court appoints a person to act as administrator of your estate. The cost of administering an estate is usually significantly higher when there is no will. There may be added costs for court applications and dealing with disputes between relatives over certain assets. Having a will can help avoid those costs, and ensure more of your estate will go directly to your beneficiaries.

Q: Are there some assets in my estate that would not be distributed through my will?

A: There are a number of assets that would normally pass outside of the estate. For example, if your residence is held in joint tenancy with another person, that asset will not be included in your estate, but will go directly to the other person on title. Similarly, if you have an RRSP and you have designated your spouse as the beneficiary, the RRSP will pass to the spouse directly. The same applies to life insurance policies where you have designated a beneficiary.

Q: Can I leave nothing to one or more of my children? What about my spouse?

A: There are occasions when a person making a will may wish to exclude a child or a spouse from sharing in their estate. This must be approached with caution and legal advice should be obtained. Generally, the law requires that you give consideration to the circumstances of your dependents and provide for them in your will. If you exclude a dependent, you must have a good reason to do so and you should bear in mind that your child or spouse may make a court application to seek to be included in the distribution of your estate.

Q: Do I need to appoint a member of my family as executor of my estate?

A: No. You can appoint anyone that you choose as executor of your estate. Your executor must be of the age of majority, ideally someone younger than you (or otherwise likely to survive you), and be an individual that you trust to manage your affairs when you are gone. Many people who make a will appoint a member of their family to act as their executor, but many others do not. You may choose to seek out other trusted friends who are prepared to act as executor. Alternately, you may appoint one of our lawyers to carry out this responsibility. There are advantages to appointing someone is neutral who has expertise in acting as an executor. The job of executor is an important one - it is worth taking the time to pick your executor carefully.

Q: I have infant children. What if something happens to me and my spouse?

A: When we prepare wills for people with minor children, we recommend that they appoint a guardian or guardians for those children in their wills. The guardian may be somebody different than the executor. A guardian is given legal responsibility for caring for the child in the place of the parents, and is usually a trusted family member or friend who already has a good relationship with the children. You can create a will that contains instructions to your executor to ensure that sufficient income (or capital) from your estate is made available to your children’s guardian to ensure that your children’s needs are met. Guardians are accountable both to the executor of the estate, for the care of the children, and to the Public Guardian and Trustee of British Columbia, with respect to the management of the children’s assets.

Real Estate Questions

Q. I am purchasing or selling my home but do not have a lawyer to complete the transaction. What should I do?

A. Either you, your realtor, or your mortgage broker can call us at 250-385-1383 or toll free at 1-888-385-1383 to be connected to our conveyancing department and explain your transaction. We will ask you a few questions to get a better understanding of the legal support you need to complete your transaction, and then you can decide whether you would like to retain us to help you complete your purchase or sale.

Q. What is a lawyer’s role in a real estate transaction?

A. Lawyers play several roles in the course of a real estate transaction. Our main role is to ensure that the transaction goes smoothly, and as part of that work we can:

  1. Review title of the property you are purchasing and advise you if there are any charges or encumbrances that may affect property ownership;

  2. Review the interim agreement, if any, and advise you on whether the agreement will affect property ownership;

  3. Confirm the status of the property’s annual taxes and utilities and ensure outstanding taxes and utilities are paid;

  4. Confirm the balance due regarding potential financial obligations you may assume on the closing date;

  5. Confirm you understand your potential GST, PST, and Property Transfer Tax obligations, calculate the amounts payable, and prepare all necessary documents;

  6. Draft a Statement of Adjustments showing the balance payable by you on the closing date;

  7. Draft all necessary documents required to complete your purchase and mortgage and review these documents with you;

  8. Arrange for document registration at the appropriate Land Title Office;

  9. Confirm property title has been transferred to you free of all charges and encumbrances, except those that you have agreed to;

  10. Pay the purchase monies to the seller on your behalf and report to you and your lender regarding completion of the transaction; and

  11. Draft mortgage documents, if you and your mortgage lender approve, at an additional cost.

Q. Can you also help me with my mortgage?

A. Absolutely! We are happy to provide services to assist with your mortgage registration or refinance. We will:

  1. Communicate with your lender on your behalf and report to you;

  2. Draft an order to pay and review it with you;

  3. Draft all necessary documents required to complete your transaction and review these documents with you; and

  4. Receive the mortgage monies in trust on your behalf and pay you those monies in accordance with your instructions.

Q. How much will it cost?

A. We offer competitive fee packages on real estate purchases, sales, and mortgage refinances. All costs depend on the value of the property, the type of lender involved, and several other factors. If you call our office at 250-385-1383 or toll free at 1-888-385-1383, we can provide a detailed, no-obligation quote for your transaction.

Q. What do I need to provide to you before you can start work on my transaction?

A. We require:

  1. Two pieces of identification (at least one must be government-issued photo ID);

  2. Contact information including address, email, and phone number;

  3. The Contract of Purchase and Sale including the Property Disclosure Statement (if any); and

  4. Instructions from your lender if a mortgage is involved.

ICBC and Personal Injury Questions

Q. I’ve been hurt in a car accident. What do I do?

A. If you believe that you did not cause the accident and you have sustained injuries, it may be prudent to consider retaining a lawyer and starting a personal injury action. For less severe accidents, it may be possible to resolve your claim through ICBC’s usual processes and legal action may not be required. However, when you have been significantly injured, taking legal action may be the only way to ensure that your interests are protected and that you receive fair compensation. 

If you are entirely at fault, ICBC has a duty to defend the other insured party’s claim against you (provided that you were insured at the time of the accident and not in breach of your policy). Be careful in providing statements to ICBC, as these statements may be used as evidence in the future.

Q. How can a lawyer help me?

A. A lawyer can assist you in receiving fair compensation at the conclusion of your claim and in receiving proper medical treatment in the interim. Navigating ICBC’s processes can be stressful. Retaining the services of a lawyer allows you to make recovering from your injuries your first priority.

Q. How does my lawyer get paid?

A. Lawyers usually charge an hourly rate or a contingency fee. Contingency fees are common in personal injury actions, though they may not always be appropriate in every personal injury case. If your lawyer agrees to accept a contingency fee, they will be paid a portion of the amount you eventually recover. In this type of arrangement, you are not required to pay legal fees until your claim is resolved (which can take months or even years); however, you may still be responsible to pay certain disbursements, or costs incurred by your lawyer in the course of their work on your behalf.

Q. How long do I have to decide whether to make a personal injury claim?

A. According to the Limitation Act, you have two years from the date of the accident to start an action for personal injuries. If you choose to retain a lawyer, you should do so well in advance of the expiration of the limitation period so that your lawyer has enough time to review your case and take necessary steps to protect your rights.

Regardless of whether you decide to retain a lawyer, we strongly advise that you wait at least two months, and ideally until all your injury symptoms have resolved, before agreeing to settle your claim with ICBC. Some injuries that do not initially appear to be significant can persist and continue to cause discomfort and impairment for much longer than expected.

Trust Questions

Q. What is a trust?

A. A trust is a legal arrangement whereby someone (called a “trustee”) holds assets (called “trust property”) which they are to manage and distribute for the benefit of another person (called a “beneficiary”).

For example, if a parent gives money to a trustee who is to hold and manage the money for minor children until adulthood, then the money is said to be held “in trust” by the trustee for the benefit of the children.

Q. What is a testamentary trust? What can a testamentary trust do for me?

A. A testamentary trust is a trust that is created in a will and comes into effect when the maker of the will dies. People establish testamentary trusts for many reasons and to achieve different estate planning goals. In particular, testamentary trusts can be used to preserve wealth and manage property for beneficiaries.

Q. Can the terms of a testamentary trust be kept confidential?

A. As with the rest of the contents of a will, the terms of a testamentary trust can be kept confidential. However, if the maker of the will dies and someone then takes the will to court to get an order allowing the executor to execute the provisions of the will, then the will becomes a public document. The contents of the will and the terms of any testamentary trusts therein will therefore also become public.

Q. What are some examples of how testamentary trusts can be used?

A. Minor Children – Parents of minor children often establish testamentary trusts for minor children who cannot hold and manage assets. A testamentary trust for a minor child can be arranged so that the child will not receive the full value of their inheritance until adulthood. Such a testamentary trust can be arranged so that the child will receive their inheritance in stages - for example, the trust can be arranged so that the child will receive 50% of their inheritance when they reach adulthood and then the other 50% when they reach the age of twenty-five. Trustees of such trusts are typically authorized to distribute money at any time for different reasons such as to provide for any education or health care needs that the child may have. Trustees can be authorized either to pay only income made on the trust or to also pay out the capital making up the trust.

Beneficiaries with Disabilities – Persons making wills may establish testamentary trusts for beneficiaries with disabilities. Trustees of such trusts are typically given absolute discretion as to how much they distribute to the beneficiary so as to maximize any government disability benefits that are received by the beneficiary.

Spouses – Persons making wills may establish spousal trusts if their estate is expected to be large, there are children from a previous marriage, or the would-be beneficiary spouse is sick, incapacitated, or otherwise unable to adequately manage finances. This kind of trust can provide income from a deceased spouse’s estate to a surviving spouse until the surviving spouse dies, at which point the trust property can be distributed to other beneficiaries.

Q. Are there possible tax advantages of using testamentary trusts?

A. Yes. Testamentary trusts can provide tax saving benefits in addition to helping with estate planning. Testamentary trusts are taxed separately from individuals and can therefore provide beneficiaries with a way to split income. Because the creation, management, and administration of trusts can be complex, it is recommended that anyone who is interested in using a trust consult with a lawyer.

Q. What is an inter vivos trust?

A. An inter vivos trust is a trust that operates during the lifetime of the person who establishes the trust (unlike a testamentary trust, which operates after the person who established the trust has died). It is a way to establish a trust that will start working right away, rather than only coming into effect after the person establishing the trust has passed away.

Q. How might an inter vivos trust benefit me?

A. A will is the key document in estate planning, but an inter vivos trust can also be useful. Inter vivos trusts can be confidential, flexible, and ensure that trust property falls outside of an estate. Generally, property that falls outside of an estate is exempt from probate fees and cannot be claimed by anyone who is not the intended beneficiary. In this way, an inter vivos trust can be used to protect property that one person intends to give to someone else.

Q. How does an inter vivos trust work?

A. Inter vivos trusts are typically established by carefully-drafted documents which set out the terms and conditions necessary for directing how the trust will operate, what property will be held in the trust, who will hold the property and act as trustee, how long will the property be held, and who will be the beneficiary (or beneficiaries) of the trust. 

When property is transferred to a trust it is generally deemed, for tax purposes, to have been disposed of at fair market value. Capital gains taxes may therefore be levied against any increase in the property’s value when the property is transferred to the trust.

Inter vivos trusts are flexible in how they can be used to address different issues. Before establishing an inter vivos trust, you should carefully consider your goal or goals. Because the creation, management, and administration of trusts can be complex, we recommended that anyone who is interested in using an inter vivos trust consult a lawyer.

Q. What are alter ego and joint partner trusts?

A. Two types of inter vivos trusts exist in Canada which allow people aged 65 and older to transfer property to a trust without paying taxes on capital gains. These two types of trusts are alter ego trusts and joint partner trusts.

Alter ego trusts Alter ego trusts are established during the lifetime of the person making the trust. A person can transfer assets, including assets that have increased in value, to an alter ego trust without paying capital gain taxes at the time of the transfer.

An alter ego trust can be made if the following three conditions are met:

  1. The person making the trust is at least 65 years old;

  2. Only the person making the trust is entitled to receive income from the trust during their lifetime; and

  3. Only the person making the trust is entitled to access the capital of the trust during their lifetime.

As these conditions suggest, alter ego trusts are established by single individuals. Property can be moved into alter ego trusts with the taxes being deferred. When the person who made the trust dies, the property is deemed to have been disposed of for tax purposes.

Joint partner trusts – Joint partner trusts are like alter ego trusts, but they are established during a couple’s lifetime. With joint partner trusts, both partners in the couple are entitled to the trust’s yearly income, and only partners in the couple are entitled to access the trust’s capital during their lifetimes. As with an alter ego trust, taxes on trust property are deferred until death, but in the case of a joint partner trust, taxes are deferred until the death of the final survivor.

Q. What are some potential advantages of using alter ego and joint partner trusts?

A. Potential advantages of using alter ego and joint partner trusts include the following:

  • The person or persons who make the trust can designate who they want to receive the trust property upon their death but, unlike a will, the trust property will not go through the probate process and the trust document will not normally become public;

  • Funds can be more readily available to beneficiaries upon the death of the person or persons who made the trust, because using trusts can avoid estate administration delays;

  • Trusts are generally less susceptible to challenges brought by persons who are not involved in the trust, its management, or its administration; and

  • In some cases, creditors may be avoided by using a trust.

Q. What are some potential disadvantages of using alter ego and joint partner trusts?

A. Potential disadvantages of using alter ego and joint partner trusts include the following:

  • Yearly tax returns may need to be filed for the trust; and

  • There may be a problem with double taxation if an estate is subject to US estate tax. Canadian tax authorities may see the trust and the individual as separate taxpayers, but US tax authorities may disregard the trust and deem it to constitute part of the estate. If this occurs, the trust may be taxed twice - once in Canada and once in the US.

The questions and answers on this page are for information purposes only and are not legal advice to the public or anyone in particular. If you have a specific question or legal issue, please contact us!