- A joint partner trust is created by a settlor aged 65 or older, and the settlor and their spouse or partner receive all the income until the later of their deaths.
- Ordinary trusts are generally taxed at the top individual rate, so how income is paid out and reported matters.
- A joint partner trust uses a different timing rule than the usual 21-year deemed sale of trust property.
- Whether a joint partner trust helps with probate and privacy depends on your assets and how the trust is set up, so get legal and tax advice first.
If you and your spouse or partner are in your senior years, you may have heard that a joint partner trust can simplify what happens when one or both of you die. The idea sounds appealing, but a trust is a serious step. You are moving property out of your own name and into a structure with its own tax and filing rules.
This article explains in plain terms what a joint partner trust is, who can set one up, what questions to ask about probate and privacy, and what the tax picture generally looks like. It is general information only, and a lawyer and accountant should look at your actual situation before you sign anything.
What a joint partner trust is
A joint spousal or common-law partner trust is a trust created after 1999 by a settlor who is aged 65 or older. The settlor is the person who sets up the trust and puts property into it.
Under the trust, the settlor and their spouse or common-law partner receive all of the income until the later of their deaths. During that time, no one else may receive income or capital from the trust.
In practical terms, that means the trust is built for couples. Children or other beneficiaries wait until after both partners have died.
How it differs from an alter ego trust
People often hear about joint partner trusts and alter ego trusts together. They are close cousins, but they serve different households.
| Feature | Joint partner trust | Alter ego trust |
|---|---|---|
| Settlor's age | 65 or older | 65 or older |
| Who can receive income or capital | The settlor and spouse or partner, and no one else, until the later of their deaths | Only the settlor, during their lifetime |
| Suited to | Couples who want to plan together | A single person, or someone planning on their own |
Probate and privacy: questions to ask
Many couples look at a joint partner trust because they want to reduce the role of the court after death and keep their affairs more private. Whether a trust actually achieves that for you depends on which assets go into it, how the trust document is written, and what stays outside it. A lawyer can confirm how it would work for your property.
- Which assets would be transferred into the trust, and which would stay in your names?
- Would moving a home or other real estate trigger costs or extra steps in Ontario? Ask about this specifically.
- Who would be the trustees while you are both alive, and who takes over when you are not able to act?
- What happens to your will, and does it still matter once the trust is in place?
- What would the trust cost to set up and to keep running each year?
Be cautious about any promise that a trust will fully avoid probate or keep everything private. Those results depend on the details, and a general article cannot confirm them for your case.
The tax side of a joint partner trust
Tax is where the details matter most. An ordinary trust is taxed at the highest individual rate with no graduated brackets. A trust can, however, deduct income that becomes payable to a beneficiary in the year, and the beneficiary then includes that income on their own return. So tax is paid by the person who receives the income, and by the trust only on income it keeps.
Trusts also have to report. A resident express trust that is not a listed trust must file a T3 return every year, even if it has no income. The return and any balance owing are due no later than 90 days after the trust's year-end. Most trusts that file a T3 must also include Schedule 15, which gives beneficial ownership information on trustees, settlors, beneficiaries and controlling persons.
Trusts are normally deemed to sell their capital property at fair market value every 21 years, which can create a tax bill. Joint partner trusts are treated differently: instead of the 21-year date, they use the death of the last beneficiary. What tax applies when the second partner dies, and how a transfer into the trust is treated, are questions for your accountant, because they depend on the property involved.
What to do next
Before you decide, gather the facts a professional will need and ask direct questions about costs, control and tax.
- List your major assets, including your home, investments and accounts, and how each is currently held.
- Confirm that the person setting up the trust is aged 65 or older.
- Decide who would act as trustee and who would be the successor.
- Ask a lawyer how probate and privacy would work for your assets, and ask an accountant about tax on transfer and at death.
- Ask who will file the annual T3 and Schedule 15, and what that costs.
- Think about whether a simpler arrangement would meet your goals.
Frequently asked questions
Who can set up a joint partner trust?
The settlor must be aged 65 or older, and the trust is for the settlor and their spouse or common-law partner. Other details, such as how it is drafted, should be confirmed with a lawyer.
Can my children receive money from the trust while we are alive?
Under the definition, no one other than the settlor and their spouse or partner may receive income or capital until the later of their deaths. If you want to help your children now, that would need a different approach.
Does a joint partner trust have to file a tax return?
A resident express trust that is not a listed trust must file a T3 every year, even with no income. Whether your trust is a listed trust depends on its assets and who the trustees and beneficiaries are.
Will a joint partner trust definitely avoid probate?
That depends on which assets are placed in the trust and how it is set up. A lawyer can tell you what would and would not be covered in your situation.
Sources
- Income Tax Act s. 122 (Justice Laws) — Justice Laws (federal)
- Income Tax Act s. 104 (Justice Laws) — Justice Laws (federal)
- CRA – Who should file (T3) — canada.ca
- CRA – When to file (T3) — canada.ca
- CRA – Enhanced reporting rules for trusts and bare trusts FAQ — canada.ca
- CRA – Trust types and codes — 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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