Alter Ego Trust

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An alter ego trust is a trust created after 1999 by a settlor aged 65 or over. The settlor has the exclusive right to receive all income from the trust. No other person, during the settlor's lifetime, may receive or otherwise obtain the use of any part of the trust's income or capital.

The rollover rule may apply to transfers of property made to the trust by the settlor, in which case any immediate tax incidence can be avoided. For more information, see Qualifying Transfer.

However, such a transfer may also be subject to an income attribution rule. In this case, the settlor, not the trust, will have to report the income (or loss) derived from the transferred property or the capital gain (or loss) derived from the subsequent disposition of the property.

For more information, see Revocable or Blind Trust.

Death of the beneficiary during the year

Since 2016, the following rules have applied to alter ego trusts for the taxation year during which the beneficiary dies:

  • The trust's taxation year is deemed to end at the end of the day of death, and a new taxation year is deemed to begin at the start of the following day.
  • The trust's income for the year is taxable in the trust's income tax return. 
  • The deadline for paying the trust's income tax and filing its income tax return and RL-16 slips corresponds to the 90th day of the year following the calendar year during which the trust's taxation year ended.

You must check box 28 of the Trust Income Tax Return (TP-646-V) if the trust is an alter ego trust and the beneficiary of the trust died in the taxation year concerned. You must also enter the date of the beneficiary's death.

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