An alter ego trust is a type of estate planning tool for individuals over the age of 65. This type of trust is often chosen for its beneficial tax consequences. It allows the individual to roll property into a trust, free of capital gains, as long as the individual is the settlor, trustee and beneficiary of the trust. The trust is considered an inter vivos trust, meaning that the property is transferred while the individual is alive.
In order to have a valid alter ego trust, it must meet the 3 certainties:
(1) Certainty of intention
(2) Certainty of subject matter
(3) Certainty of object
In particular, in order to have certainty of subject matter, there must be clear as to what beneficial share each beneficiary will receive. In other words, the property being transferred must be held entirely by the individual.
In Mong Alter Ego Trust No. 1 v. Yip, 2022 BCSC 1327, the deceased mother was the settlor, trustee and beneficiary of the trust. The defendant argued that the Alter Ego Trust was not valid because the subject matter was uncertain. In other words, the mother did not own the entire beneficial interest of the property before transferring the property into the trust. However, the court found that the mother owned the disputed property, entirely. On the issue of certainty of subject matter, the court stated “the subject matter is clearly identifiable and the interests to which the beneficiary is entitled is also clearly defined. There was no ambiguity in the trust declarations.” In order to have a valid alter ego trust, the individual transferring the property must own 100% of the beneficial interest.
If you or a loved one are seeking to write a will, or challenge a will, consult Vancouver and Burnaby Lawyers Christina Ma ([email protected]) and Andrew Rebane
([email protected]) at Resolutions Law Corporation, Burnaby, British Columbia at or 778-372-7107.
Tags: Burnaby Lawyer; Estate; Estate Planning; Wills; Trust