- CRA describes an alter ego trust as one created after 1999 by a settlor aged 65 or older, who is entitled to all income and is the only person who can receive income or capital during their lifetime.
- Moving a home into a trust is not automatically tax-free: land transfer tax can still apply to a mortgage that the trust takes on, whatever the relationship between the parties.
- Most trusts other than bare trusts must file a T3 return within 90 days of the trust's year-end, so a trust adds ongoing paperwork.
- Whether a trust actually avoids probate or saves tax in your case depends on the facts, so it is worth confirming with a lawyer and an accountant before you sign anything.
If you are 65 or older and own your home, you may have heard that putting it into an alter ego trust can keep it out of probate and make things easier for your family. It is a real planning tool, but it is also a significant step: you are changing who holds legal title to your largest asset.
This article explains in plain language what an alter ego trust is, how land transfer tax and trust tax reporting generally apply, and what questions to settle before you transfer your home. It is general information, not advice for your situation.
What an alter ego trust is
The Canada Revenue Agency (CRA) describes an alter ego trust as a trust created after 1999 by a settlor who is 65 or older. The settlor is entitled to all of the trust's income during their lifetime, and is the only person who can receive income or capital from the trust while they are alive.
In practice, that means you set up the trust, you transfer property to it (such as your house), and a trustee holds and manages the property under the terms of the trust document. Those terms matter a great deal. They decide who the trustee is, what happens if the trustee cannot act, and who receives the property after your death.
A trust can also elect out of alter ego status on its first-year T3 return. That choice changes when the trust is treated as selling its property for tax purposes, which is covered below.
Land transfer tax when the home goes into the trust
Ontario's land transfer tax is payable by the person who acquires land or a beneficial interest in land, and it is payable when the transfer is registered. A transfer to a trust is still a transfer, so you need to look at what is being given in exchange.
Ministry guidance says a gift of land is not exempt as such, but if no consideration passes in any form between the parties, no tax is payable. Separately, a conveyance between a trustee and the beneficial owner is taxed at nil consideration where beneficial ownership has not changed since the transferor obtained registered title. Whether your transfer fits that description depends on the trust terms and the facts.
The mortgage is the common trap. The Ministry says an outstanding encumbrance is taxed as consideration regardless of the relationship between the parties, with a narrow exception for certain spousal transfers. Assumed liabilities count as consideration. If your home has a mortgage and the trust takes it on, tax may be payable even though no cash changes hands.
For electronic registration of a trustee and beneficial owner conveyance, the Ministry requires nominal-consideration statement 9049 plus 9051, 9052 or 9053. It no longer requires a supplementary trust affidavit, but it can later ask for evidence of the trust. Only authorized Teraview account holders and their registered users can submit documents electronically, which includes lawyers.
Tax reporting and what happens at death
T3 returns are due no later than 90 days after the trust's tax year-end, and trusts other than bare trusts must file a T3 with Schedule 15 for 2025 year-ends unless specific conditions are met. That means a trust adds yearly filing, and you will usually want an accountant involved.
For an alter ego trust, CRA's T3 guidance treats the deemed disposition day as the settlor's death. On that day the trust is deemed to dispose of its capital property at fair market value, and this is reported on Form T1055. If the trust elected out of alter ego status, the deemed disposition day is 21 years after the trust was created.
Bare trusts are different. CRA describes a bare trust as one where the trustee has no significant powers, acts only on the beneficiary's instructions and holds only legal title. Reporting rules for bare trusts have been changing, so check the current CRA position rather than relying on older information.
How a home moves into the trust for income tax purposes, and whether any rollover applies, is a question for your accountant or lawyer. It depends on your facts and the current rules.
Control, probate and the questions to settle first
Many people consider a trust to avoid probate. Probate is normally needed when the deceased owned real property, and estate administration tax is $15 per $1,000 of estate value above $50,000 for applications on or after January 1, 2020. Whether a trust saves those costs in your case depends on what is held in the trust and how it is drafted, so confirm it rather than assume it.
Control is the other big question. Once the home is in the trust, the trustee holds legal title. You may be the trustee, or you may choose someone else, and the document should say what happens if the trustee dies or becomes unable to act. Think about whether a co-trustee, a successor trustee and clear instructions on selling or mortgaging the home are needed.
| Question | Why it matters |
|---|---|
| Is there a mortgage on the home? | An encumbrance the trust takes on is taxed as consideration. |
| Is the trust created by someone 65 or older, with only the settlor receiving income and capital? | This is how CRA describes an alter ego trust. |
| Who is trustee, and who replaces them? | The trustee holds legal title and manages the property. |
| Who files the T3 each year? | Most trusts other than bare trusts must file within 90 days of year-end. |
| Are there other owners or a spouse? | Joint ownership and spousal rights can change how the transfer works. |
What to do next
- Get a copy of your current title and mortgage details, so a lawyer can see exactly what is being transferred.
- List everyone who has an interest in the home, including a spouse or co-owners.
- Decide who you would trust as trustee and as successor trustee.
- Ask a lawyer whether land transfer tax applies to your transfer, and ask about any mortgage lender's consent.
- Ask an accountant how the transfer is treated for income tax and who will prepare the yearly T3 return.
- Ask about title insurance and home insurance, since you should confirm with the insurer and a lawyer how a transfer to a trust is treated.
A trust is difficult to undo once it is in place, so it is worth getting the legal and tax advice before you sign, not afterwards.
Frequently asked questions
Do I pay land transfer tax when I move my house into an alter ego trust?
It depends. If no consideration passes in any form, no tax is payable on a gift of land, and a trustee and beneficial owner conveyance is taxed at nil consideration where beneficial ownership has not changed. A mortgage the trust takes on is treated as consideration, so a lawyer should check your specific transfer.
Who can set up an alter ego trust?
CRA describes it as a trust created after 1999 by a settlor aged 65 or older, where the settlor is entitled to all income during their lifetime and is the only person who can receive income or capital during that time.
What happens to the trust's property when the settlor dies?
For an alter ego trust, CRA's guidance treats the settlor's death as the deemed disposition day, when the trust is deemed to dispose of capital property at fair market value. This is reported on Form T1055. Who receives the property is set by the trust document.
Does the trust need to file a tax return?
Generally yes. T3 returns are due no later than 90 days after the trust's tax year-end, and trusts other than bare trusts must file a T3 with Schedule 15 for 2025 year-ends unless specific conditions are met. An accountant can confirm what applies to yours.
Sources
- Ontario.ca – Land Transfer Tax — ontario.ca
- Ontario.ca – Transactions with Nominal Consideration — ontario.ca
- Ontario.ca – Conveyances Involving Trusts — ontario.ca
- Ontario.ca – Register land documents electronically — ontario.ca
- Ontario.ca – Apply for probate of an estate — ontario.ca
- Ontario.ca – Estate Administration Tax — ontario.ca
- CRA – Trust types and codes — canada.ca
- CRA – T3 Trust Guide — canada.ca
Links go to official government, court and regulator pages. The law changes — confirm you are reading the current version.
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