What is a joint partner trust and how does it work for a couple in Ontario?

A joint partner trust is a trust that a person 65 or older can create during their lifetime and fund with property on a tax-deferred rollover basis, provided that only the person who created it and their spouse or common-law partner can receive any of the income or capital while both are alive. Because the transfer into the trust doesn't trigger an immediate capital gain, it lets a couple move assets like investments or a cottage into a trust structure now, while deferring the tax that would otherwise apply on a transfer at fair market value.

For an Ontario couple, a joint partner trust is often used alongside, or instead of, a will for assets placed in it, because those assets can potentially bypass Ontario probate and its Estate Administration Tax on the second spouse's death, since they're already held in the trust rather than in either spouse's personal estate. The trust is still subject to its own tax rules, including an eventual deemed disposition, and the couple gives up outright ownership and flexibility over the transferred property in exchange for these benefits.

Because age, spousal status, and how the trust is funded all affect whether it works as intended, this needs to be set up carefully with tax and estate advice.