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.