If You’re Canadian, What Is the Best Trust to Put Your House In?

What Type of Trust Is Best for Holding a House in Canada?

The right trust depends on your situation and goals, but if you are 65 or older, an Alter Ego Trust or Joint Partner Trust is often the most common option.

These two types of trusts can help a home bypass probate. Moreover, you can still benefit from the property during your lifetime.

If you die and your home is in your name alone, it will generally go through probate before it can be transferred to your beneficiaries. To prevent the family home from getting hit with probate fees, some families choose to place their home in an Alter Ego or Joint Partner Trust.

Written By Tiffany Woodfield, Financial Advisor, TEP®, CRPC®, CIM®

Summary of Key Points

• For Canadians who are 65 or older, an Alter Ego Trust or Joint Partner Trust may allow them to benefit from their home during their lifetime while helping it bypass probate in future.
• A trust can provide greater privacy and control over who receives your home and when.
• Trusts can be useful for blended families, incapacity planning, multiple properties, and assets or beneficiaries in different locations.
• Trusts also create added costs, tax considerations, and administrative work, so they are not the right choice for every family.
• Before creating a trust, identify your goals and speak with experienced legal, tax, and financial professionals.

Table of Contents

1. When Does It Make Sense to Put a House in a Trust?
2. What Are the Pros and Cons of Putting Your House in a Trust?
3. What Should Affluent Canadians Do Before Creating a Trust?
4. Case Study: Using a Trust to Take Care of a Second Spouse and Adult Children
5. Trusts Are Best for Families with Complexity
6. When Should You Get Professional Estate Planning Help?

When Does It Make Sense to Put a House in a Trust?

A trust isn’t the right tool for every family.

But there are certain circumstances where the benefits of using a trust may outweigh the costs of setting up and maintaining the trust. 

Privacy and Estate Control

If you want to have more control over what happens to your home when you pass, a trust provides this option. For example, you could allow a spouse to live in the house before it passes to your children. A trust also keeps the details of your property private because assets held in a trust generally remain private. If you have a very valuable property which you’d like to remain private, a trust may be something you choose to use in your estate plan. 

Multiple Properties

When you own multiple properties, a trust can make it easier to transfer those properties upon death according to your wishes. Using a trust can also help you avoid probate on each property. 

Incapacity Planning

A trust can be helpful for incapacity planning because the house is owned by the trust rather than by you personally. If you become unable to manage your affairs, the trustee you selected can continue managing the property according to the instructions in the trust, helping ensure your wishes are carried out without interruption. 

Blended Family Planning

A trust can be very helpful with blended family planning because you can create instructions around who will ultimately inherit the property. A trust helps you ensure your wishes are followed after you die. For example, you can ensure a spouse has a place to live while also protecting your children from a previous relationship.

Probate Planning

If a house is held in a trust, it usually does not form part of your estate and can avoid probate. This helps to simplify the transfer of the property to your beneficiaries and keep details about the home private.

What Are the Pros and Cons of Putting Your House in a Trust?

Pros of Putting a House in a Trust	Cons of Putting a House in a Trust
Greater privacy: Trust assets may be kept out of the public probate process.	Higher setup costs: You will likely need legal, tax, and other professional advice to establish the trust properly.
More control: You can set rules for who benefits from the house and when.	Ongoing expenses: The trust may require annual tax returns, professional advice, and administration fees.
May avoid probate: Depending on the trust and how it is structured, the house may pass outside the estate, helping to avoid probate fees and delays.	More complexity: Managing a house through a trust can involve additional legal, tax, and administrative responsibilities.
More flexibility for blended families: A trust can provide for a spouse while preserving the house or its value for children from a previous relationship.	Changes may be difficult: Depending on the type of trust used, it may be difficult or impossible to change its terms or move the house out of it.
Supports incapacity planning: A trustee can continue managing the house if you become unable to handle your financial affairs.	The 21-year rule may apply: Certain trusts are generally treated as having sold their assets every 21 years, which can trigger capital gains tax.
Simplifies property transfers: A trust may make it easier to manage and eventually transfer multiple properties to beneficiaries.	Tax consequences must be reviewed: Transferring a house into a trust can affect capital gains tax, the principal residence exemption, and land transfer tax, depending on the circumstances.

What Should Affluent Canadians Do Before Creating a Trust?

Before creating a trust, take time to think about what matters most to you.

Think deeply about what you would like to have happen to your assets when you pass away. 

Next, create a list of your assets, including your home, vacation properties, investment accounts, and business interests. Remember to consider the complexity of your situation, such as owning multiple properties, assets in different provinces or countries, or having a blended family. 

You should also think about your beneficiaries, including where they live, their financial maturity, and any special circumstances that may affect how they receive an inheritance. 

Finally, make sure you understand the ongoing costs, tax considerations, and administrative responsibilities that come with having a trust.

In brief, this is what you should do BEFORE creating a trust: 

• Get clear on what matters most to you. 
• Decide what you want to happen to your assets.
• Make a complete list of your assets.
• Consider properties or assets in different locations.
• Think about your family situation.
• Consider your beneficiaries’ needs and maturity.
• Understand the ongoing costs and tax rules of trusts.
• Be prepared for the administrative responsibilities.

Case Study: Using a Trust to Take Care of a Second Spouse and Adult Children

Jack and Susan* are a married couple in their late 60s.

Jack owned a home and a lakefront cottage before marrying Susan. Both were over age 65 when they got married, and Jack had a daughter from a previous marriage. 

Jack wanted Susan to continue enjoying both properties if he passed away first, but he also wanted his daughter to inherit them in the future, so he decided to transfer the properties into a Joint Partner Trust. 

The trust allowed Jack and Susan to benefit from the properties during their lifetimes while ensuring the properties would eventually pass to his daughter according to his wishes.

This approach helped balance the needs of his spouse with his long-term goals for his family. 

It provided clear instructions about how the properties would be handled so there would be no confusion in the future. 

Trusts Are Best for Families with Complexity

While not everyone needs a trust, they can be lifesaving in the right situation.

That’s why I always tell people to first identify what matters most to you.  

For example, if you’re in a second marriage and you’re concerned about ensuring your kids receive their inheritance, then the benefits of a trust are likely going to outweigh the initial set-up fees and the ongoing costs.  

When you have a large estate with multiple properties and beneficiaries in various provinces and countries, a trust gives you the security to know your wishes will be followed despite the complexity. 

But if you have a simple estate, you’re not a blended family, and you don’t foresee conflict when you pass, then perhaps you can skip the use of the trust.

Instead, you could do a POA for your incapacity planning, set up a will, and name your beneficiaries. 

When Should You Get Professional Estate Planning Help?

Professional estate planning help becomes increasingly important as your life and finances become more complex.

A lawyer can help prepare legal documents such as Wills, Powers of Attorney, and Representation Agreements. An accountant can provide guidance on tax implications, while a financial advisor can help coordinate your overall estate strategy and ensure your assets align with your goals. 

You should consider seeking a professional with experience in dealing with situations such as yours.  For example, get specialized advice if you own a business, have a blended family, expect an inheritance, or have assets in more than one jurisdiction. 

Remember: Even if your situation appears straightforward today, professional guidance can help identify issues before they become costly problems later. 

Estate planning is not a one-time event. Life changes because people get married, divorced, and have children or grandchildren. People may move, sell a business, retire or receive an inheritance — these are all good reasons to review your plan.

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Read More:

💎 What Is the Best Kind of Trust in Canada?

💎 How Does a Family Trust Work in BC?

About the Author

*Names have been changed to protect the identity and privacy of the individuals in this story. Please seek the advice of professionals before taking action. This case study is for educational purposes only.