If you are over 65 in Ontario, a Joint Partner Trust allows you to bypass the 1.5% Estate Administration Tax (probate) entirely. More importantly, it ensures your current spouse is financially supported during their lifetime, while guaranteeing the remaining capital automatically flows to your biological children from a previous marriage.
Blended families are incredibly common in modern Ontario, but they create a major headache for estate planning. If you are in a second marriage, you likely want to make sure your new spouse is comfortable and cared for after you pass away. However, many people secretly worry: “What if my spouse remarries, changes their Will, and completely disinherits my children from my first marriage?” This is a valid fear, and a standard Will is often not strong enough to prevent it.
This is where the Joint Partner Trust (JPT) comes in. Available specifically to Canadians aged 65 and older, a JPT is a powerful legal tool that provides absolute certainty. Whether you own a family cottage in Muskoka, rental properties in Toronto, or a large investment portfolio in Ottawa, this trust allows you to lock in your final wishes without triggering massive tax bills. In this guide, we will walk you through the step-by-step process of creating a Joint Partner Trust to protect your blended family’s future. 📊
Step-by-Step Process for Creating a Joint Partner Trust
Setting up a trust requires careful legal and tax planning. You are essentially creating a new legal “bucket” and moving your assets into it while you are still alive. Here is how the process works in Ontario.
Step 1: Meeting the Strict Eligibility Rules
To create a Joint Partner Trust, the person setting it up (the “Settlor”) must be at least 65 years old and a resident of Canada. Furthermore, the trust must be structured so that only you and your spouse (or common-law partner) are allowed to receive income or capital from the trust while either of you is still alive. Nobody else, including your children, can touch the money until both spouses have passed away. 👴
Step 2: Designing the Terms of the Trust
You will sit down with an experienced estate lawyer to draft the Trust Deed. This document outlines exactly how the trust will operate. You will decide who will act as the Trustee (the person managing the money). Usually, you and your spouse act as the initial trustees. You will also explicitly state that upon the death of the second spouse, the remaining assets must be divided among your specific biological children.
Step 3: Transferring Assets into the Trust
Once the trust is legally created, you must formally transfer your assets into it. For real estate, this means registering a new deed at the Ontario Land Registry Office, changing the owner from your personal name to the name of the Trust. Because of special Canada Revenue Agency (CRA) rules for Joint Partner Trusts, you can “roll over” these assets without triggering capital gains taxes at the time of transfer. 🏘️
Step 4: Living Off the Trust Income
For the rest of your life, and the rest of your surviving spouse’s life, the trust will generate income (from investments or rental properties). You and your spouse will use this income to live comfortably. Because you are the trustees, you maintain total control over the buying and selling of assets within the trust during your lifetimes.
Step 5: Automatic Distribution After Death
When the second spouse eventually passes away, the trust immediately dictates where the money goes. Because the assets are already inside the trust, they do not belong to the deceased spouse’s personal estate. This means the assets entirely bypass the Ontario Superior Court of Justice, avoiding probate delays and guaranteeing your biological children receive their inheritance. 🔒
How Much Does a Joint Partner Trust Cost in Ontario?
While a Joint Partner Trust costs more to set up than a simple Will, the tax savings upon death are usually enormous, easily paying for the legal fees tenfold.
| Service / Tax | Estimated Cost in Ontario (CAD) | Benefit of the Trust |
|---|---|---|
| Law Firm Setup Fees | $3,500 to $10,000+ | One-time fee for customized legal drafting and advice. |
| Estate Administration Tax (Probate) | $0 (Exempt) | Saves roughly $15,000 for every $1 million in trust assets. |
| Annual Tax Returns (T3) | $500 to $1,500 annually | The trust must file its own tax return with the CRA each year. |
| Land Transfer Tax | Nominal (usually under $100) | Special exemptions apply when moving a home into this specific trust. |
By avoiding the 1.5% probate fee on a $2 million estate, your family immediately saves $30,000, leaving much more wealth for your children. 💵
How Long Does the Process Take?
Setting up the trust and transferring your real estate and investment accounts generally takes between 4 to 8 weeks, depending on how quickly your financial advisors and lawyers process the paperwork. The real time-saving benefit happens after death: because the trust bypasses the probate court, your children can receive their inheritance in a matter of weeks, rather than waiting the typical 8 to 14 months it takes to probate a standard Will in Ontario.
Frequently Asked Questions (FAQ)
Do I still need a Will if I have a Joint Partner Trust?
Yes. A trust only controls the assets you specifically put into it. You still need a “pour-over” Will to handle personal belongings (like jewelry or cars), minor bank accounts, and to name an executor to file your final personal income tax return with the CRA.
Can I change my mind and break the trust?
Most Joint Partner Trusts are drafted as “revocable” during the lifetime of the person who created it. This means as long as you are mentally capable, you can usually alter the trust or take the assets back out if your family situation drastically changes.
Does a Joint Partner Trust save me from income tax?
No. While it saves on Estate Administration Tax (probate), it does not save on income tax or capital gains tax upon death. When the second spouse dies, the trust is deemed to have sold all its assets, and the trust must pay the resulting capital gains taxes.
What if my spouse is younger than 65?
Only the person creating the trust (the Settlor) must be 65 or older. If you are 68 and your new spouse is 55, you can still legally create a Joint Partner Trust and transfer your assets into it without triggering immediate capital gains taxes.
Does the trust protect assets from my children’s creditors?
Yes, depending on how it is drafted. Because the biological children do not legally own the assets until after both spouses pass away, the children’s personal creditors (or a divorcing spouse) generally cannot touch the trust assets while you and your partner are alive.
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