Some people 65 years of age or older, as part of their estate planning process, are transferring assets at no tax cost to lifetime trusts such as alter ego or joint partner trusts. A key benefit is the avoidance of provincial probate fees required when transferring such assets through a will.
They also provide an alternative to power of attorney allowing the beneficiary of the trust access to the assets if the individual becomes ill or incapacitated in any way.
The main disadvantage to lifetime trusts is that on the death of the individual there is a deemed disposition of the fair market value of the property of the trust. All of the income in the trust that is not paid to alternate beneficiaries will be taxed at the highest federal/provincial tax rates.
On the other hand, income left in testamentary trusts (related to a will executed on the death of an individual) is taxed at graduated income tax rates which can result in considerable tax savings for the beneficiaries.