Insights Tax And Estate Planning

Setting up a trust could be beneficial for you and your family. Discover how to strategically use trusts in your estate planning.
Jamie Golombek, Debbie Pearl-Weinberg Aug. 30, 2023 11-minute read

What is a trust?

Types of trusts

Three common types of life-interest trusts for tax purposes are:

  • Alter Ego Trust: The individual, age 65 and over, who establishes and contributes to the trust is the only life interest beneficiary.
  • Joint Spousal or Partner Trust: The individual or individuals, age 65 and over, who establish and contribute to the trust and their spouse or partner are the only life interest beneficiaries.
  • Spousal or partner trust: The spouse or partner of the individual who establishes and contributes to the trust is the only life interest beneficiary.

For these trusts, there are limits on who gets the income and capital during the life interest.

Tax implications

Strategic uses of trusts

Inheritance protection

Trusts for minors

Control distributions to beneficiaries

Dependents with a disability

Income splitting


Probate and estate administration tax

Minimize disputes among heirs

Estate freeze

Matching incentive trust

Offshore inheritance trusts

New trust reporting rules

In summary

1 The rules differ under the Quebec Civil Code. Under civil law, a trust is defined as a patrimony constituted by a settlor who transfers property from his patrimony to another autonomous and distinct patrimony that is allocated for a particular purpose and is entrusted to one or more trustees to administer. Acceptance of the administration of the trust by the trustee is sufficient to make certain the rights of the beneficiary. In order to be validly constituted, an independent trustee must be in office, and must be a person who is neither the settlor nor one of the beneficiaries.

2 In this article, spouse refers to someone to whom you are legally married. Partner refers to a common-law partner under the Income Tax Act, which means someone who cohabits with you in a conjugal relationship, provided the two of you have cohabited for the past 12 months or are jointly parents of a child.

3 Some exceptions apply for transfers to certain trusts such as an alter ego trust, a joint spousal or partner trust or a spousal or partner trust.

4 These rules apply if property that you dispose of is reacquired within 30 days and is still held on the 30th day by you or an affiliated person. This includes a trust that has you or your spouse or partner as a majority beneficiary.

5 The “Henson Trust” is named after an Ontario Appeal Court decision (Ontario Ministry of Community & Social Services vs. Henson (1989), 36 ETR 192 (Ont. CA)) involving a father who established a fully discretionary trust for his daughter. The Ontario Ministry of Community and Social Services tried to look through the trust such that she would be disqualified from certain asset-tested government benefits. The Court ruled that the assets were not to be considered hers. In early 2019, the validity of the Henson trust was upheld by the Supreme Court of Canada in the S.A. v. Metro Vancouver Housing Corp case Opens in a new window.. Consult a legal advisor, as some provinces and territories may not recognize Henson trusts for purposes of government benefits.

6 From January 1, 2023 to March 31, 2023, the prescribed rate is 4%. At times the prescribed rate has been as low as 1%.

7 Note that it’s still generally advisable to have a will to cover off any residual assets or personal effects that have not been transferred to the life-interest trust.

8 Certain trusts are exempt from these rules. For example, QDTs and trusts holding less than $50,000 in deposits, government debt and listed securities are also exempt from the rules.

9 Quebec has indicated that that it intends to follow these new federal reporting requirements.

10 Further information on these new trust reporting rules can be found in our report Enhanced Trust Reporting Rules (PDF, 115 KB) Opens in a new window..

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Written by

Jamie Golombek, FCPA, CPA, CA, CFP, CLU, TEP
Managing Director, Tax & Estate Planning, CIBC Private Wealth

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Debbie Pearl-Weinberg, LLB
Executive Director, Tax & Estate Planning, CIBC Private Wealth

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