Written by Ron Cooke, President & Founder of Strategic Wealth Protection Partners in Ontario, CEA®, Member of the Estate Planning Council Canada
Dorothy* was in her late 70s and was dealing with a family conflict.
She wanted to remove her home from her estate so it would not form part of the assets dealt with after her death. Her tax advisor transferred the residence into a living trust because the goal was to simplify the estate and reduce potential conflict among family members.
Summary of Key Points
- Challenge: An Ontario homeowner transferred her principal residence into a living trust to simplify her estate and reduce potential family conflict.
- Problem: Because she lived longer than expected, the trust’s 21-year deemed disposition created an unexpected tax liability and affected the principal residence exemption.
- Key Lesson: Estate planning strategies should be evaluated for their long-term tax consequences, including the impact of the 21-year rule.
- Alternative Approach: Comparing trust planning with other estate planning options before implementation may help avoid unintended tax consequences.
- Takeaway: This case demonstrates why every estate plan should be thoroughly stress-tested to ensure it solves one problem without creating a larger one.
The Problem
The issue was that once the home was transferred into the trust, the planning created an unintended tax problem.
The advisor did not expect Dorothy to live another 21 years, but she lived to age 100. Because the property was held in the trust, the principal residence exemption was lost or limited, and tax became payable on the gain 21 years later.What was intended to avoid family conflict ended up creating a significant tax issue.
The Solution
In this case, there was no solution. Dorothy came to me after she had already set up the trust. If she had gone through our Living Estate Plan Process first, the problem could have been avoided.
This case is an important reminder of why it’s so important to look at all your estate planning options and their potential downsides. When I review estate planning options with clients, I don’t look at only one strategy.
I help my clients explore all the possible outcomes before deciding — including the possibility of the 21-year rule coming into effect.
The key lessons included:
- Reviewing whether a trust is truly appropriate before transferring a home is critical.
- Consider the impact of a trust on the principal residence exemption.
- Project what happens if the client lives longer than expected.
- Compare trust planning against other options, including life insurance for tax liquidity.
- Make sure the estate plan solves one problem without creating a larger one.
The outcome in this case shows why every estate strategy must be stress-tested before it is implemented.
*Names and identifying details have been changed to protect the privacy of SWPP’s clients.
Discover the Benefits of a Living Trust in Ontario
Are you an Ontario resident considering a living trust as part of your estate planning?
At Strategic Wealth Protection Partners, we’re here to guide you through every step of the process with expert advice and personalized support. Begin your estate planning journey today with a Living Estate Plan Consultation from our experienced team.
Our mission at SWPP is to help you create an estate plan that secures your legacy, shields your assets from unnecessary taxation, and ensures your loved ones are cared for. By designing a living trust tailored to your goals, our experts will help you build a plan that truly reflects your values and priorities.
Take control of your future—start planning today!
Schedule a Living Estate Plan Consultation
Planning your legacy is about more than numbers—it’s about ensuring your family remembers you and your values are honoured for many years to come.
Estate planning and trusts can feel overwhelming, especially if it’s your first time. That’s why we’re here.
With our simple, 5-Step Living Estate Plan, we make the process easy, helping you create a comprehensive estate plan or trust that protects your assets from taxes and probate fees while preserving your legacy. Tools like The Final Word Journal capture your story, wishes, and essential details like accounts and end-of-life plans, ensuring your family has clarity and comfort.
Take the first step today—schedule a consultation call and give your family the ultimate gift: peace of mind and the assurance they were always your priority.
Read More
If you’re starting your estate planning process, you may find these articles helpful:
- How to Create a Living Trust in Canada
- Living Trust Ontario Guide: What It Is & Do You Need One?
- Pros and Cons of Putting a House in a Trust in Canada
About the Author
RON COOKE, PRESIDENT & FOUNDER OF STRATEGIC WEALTH PROTECTION PARTNERS
With over 30 years in financial services, I’ve seen the challenges families face when a loved one passes—lost assets, unnecessary taxes, and emotional stress. That’s why I created the Living Estate Plan, a comprehensive process to protect assets, eliminate estate and probate fees, and create legacies that are remembered for many years to come.
This plan ensures your family receives not just your wealth, but a meaningful reminder of your care and love. Tools like The Final Word Journal capture your story, wishes, and essential details, offering clarity and comfort during difficult times.
Your final gift should be more than money—it should be peace of mind, cherished memories, and an organized estate.
Schedule a Call
Schedule a 30-minute consultation call with Strategic Wealth Protection Partners.
Click HERE to schedule a consultation.
