- A joint partner trust is a living trust created after 1999 by a settlor aged 65 or older, where the settlor and their spouse or partner are entitled to all the income until the later of their deaths.
- The first deemed disposition for a joint partner trust happens on the later of the two deaths, not at 21 years.
- Whether assets in a trust avoid estate administration tax depends on whether the deceased still owned them beneficially, so the details matter.
Couples sometimes hear that a joint partner trust can keep assets out of probate and simplify things after a death. The reality is more mixed, and the trade-offs deserve a careful look before you transfer anything.
This article explains what a joint partner trust is, what tax rules apply, what it may or may not do for probate, and what control you would be giving up.
What a joint partner trust is
A joint spousal or common-law partner trust is a living trust created after 1999 by a settlor aged 65 or older. The settlor and their spouse or partner must be entitled to all of the trust's income until the later of their deaths.
It sits alongside similar trusts. The table shows how they differ.
| Trust | Key feature |
|---|---|
| Joint partner trust | Living trust created after 1999 by a settlor aged 65 or older; settlor and spouse or partner entitled to all income until the later death |
| Alter ego trust | Living trust created after 1999 by a settlor aged 65 or older; settlor entitled to all income during their lifetime |
| Spousal trust under a will | Property left by will can pass at cost if the spouse is entitled to all the income for life and no one else may receive or use income or capital in their lifetime |
Possible benefits
- Tax timing: the first deemed disposition happens on the later of the two deaths, instead of on the usual 21-year date.
- Estate administration tax: Ontario's tax is based on the deceased's property that must be disclosed, less encumbrances on real property. Assets that genuinely pass outside the estate are excluded from that value.
- Continuity: a trust can have trustees who carry on managing property if one partner can no longer do so, depending on how the trust document is written.
Be careful with the probate point. Ontario includes in the estate value any property the deceased owned that was held in another person's name, and putting legal title in another name does not by itself remove a beneficially owned asset from the tax. Whether a particular trust keeps a particular asset out of the estate depends on the trust terms and the facts, which is worth confirming with a lawyer.
Drawbacks and control you give up
A trust is a separate arrangement. Once assets are transferred, they are held by the trustees under the trust document, so you no longer simply own them in your own name. How much say you keep depends on who the trustees are and what the document allows.
- Tax filing: a Canadian-resident express trust that is not a listed trust must file a T3 return, and generally must also report beneficial ownership information on Schedule 15.
- Tax rate: a trust's taxable income is generally taxed at the highest individual rate, with graduated rate estates and qualified disability trusts excluded.
- Late-filing penalty where tax is owing: 5% of the unpaid tax, plus 1% of the unpaid tax for each full month the T3 return is late, up to 12 months.
- Late-filing penalty where no tax is owing: $25 a day, with a minimum of $100 and a maximum of $2,500.
- Flexibility: changing a trust later may be difficult, and beneficiaries who cannot consent, such as minors, may need the court to approve a variation.
Trustee duties
When investing trust property, a trustee in Ontario must use the care, skill, diligence and judgment of a prudent investor under the Trustee Act, but the investment powers do not authorize or require a trustee to act inconsistently with the terms of the trust. A trustee is also entitled to a fair and reasonable allowance for their time, fixed by a judge of the Superior Court of Justice, unless the instrument creating the trust fixes the allowance.
What to do next
- Check that you both meet the age and entitlement conditions.
- List the assets you would transfer and who owns each one now.
- Decide who the trustees would be and what happens if one cannot act.
- Ask an accountant how the tax filing and deemed disposition rules would apply.
- Ask a lawyer whether the trust would really keep assets outside your estate.
Frequently asked questions
Who can create a joint partner trust?
A settlor aged 65 or older, creating a living trust after 1999. The settlor and their spouse or partner must be entitled to all of the trust's income until the later of their deaths.
When is a joint partner trust taxed on a deemed sale?
The first deemed disposition happens on the later of the two deaths, rather than at the usual 21 years.
Does a joint partner trust avoid Estate Administration Tax?
It depends on the facts. Estate administration tax looks at property the deceased owned, including property held in another person's name. A lawyer can tell you how a particular trust would be treated.
Does a joint partner trust file a tax return?
If it is a Canadian-resident express trust that is not a listed trust, it must file a T3 return. The return is due no later than 90 days after the trust's tax year-end.
Sources
- Income Tax Act, s. 122 (Justice Laws) — Justice Laws (federal)
- Income Tax Act, s. 104 (Justice Laws) — Justice Laws (federal)
- Income Tax Act, s. 70 (Justice Laws) — Justice Laws (federal)
- Canada Revenue Agency – Trust types and codes — canada.ca
- Estate Administration Tax Act, 1998 (e-Laws) — Ontario e-Laws
- Ontario.ca – Estate Administration Tax — ontario.ca
- Trustee Act, R.S.O. 1990, c. T.23 (e-Laws) — Ontario e-Laws
- Variation of Trusts Act (e-Laws) — Ontario e-Laws
Links go to official government, court and regulator pages. The law changes — confirm you are reading the current version.
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