Using a Family Trust to Avoid Probate in Canada
"Put it in a trust and skip probate" is advice that gets passed around at dinner parties as if it were a free lunch. It is true as far as it goes — assets a trust owns are not part of your estate, so they do not pass through probate — but the cost of getting there usually dwarfs the probate fee it saves. Trusts are a legitimate probate-planning tool for the right person, and an expensive over-engineering for everyone else. The trick is knowing which you are.
This guide explains how trusts avoid probate, which trusts are used, and when it is actually worth it. It is general information, not advice.
How a trust avoids probate
Probate fees are charged on the value of the estate that passes under your will. Assets owned by a trust are not part of your estate — the trust already owns them, and it simply continues to hold them after your death under its terms. So those assets never enter the probated estate and never attract the probate fee.[1] That is the whole mechanism, and it is real.
The trust you would actually use
For probate planning, the usual vehicles are alter ego and joint partner trusts, available from age 65. Their key advantage is funding: you can transfer assets into them on a tax-deferred basis at cost, so settling the trust does not trigger a capital gain.[3] By contrast, transferring appreciated property into an ordinary family trust is a deemed disposition at fair market value — a capital gain on the way in — which usually makes a regular family trust a poor probate-avoidance tool. See alter ego trusts in Canada.
The trade-offs
This is where the dinner-party advice falls apart. A trust costs money to set up, requires an annual T3 return, is taxed at the top marginal rate on income it retains, and faces a deemed disposition every 21 years (though alter ego/joint partner trusts are timed to a death instead).[2] Probate fees, by contrast, are modest — a fraction of estate value. For most people, paying real ongoing costs to avoid a small one-time fee is a losing trade.
The simpler alternatives
Before reaching for a trust, most people should use the low-cost, low-risk probate reducers: beneficiary designations on registered plans and insurance, appropriate joint ownership, and, in Ontario and BC, multiple wills. These achieve probate savings without a trust's cost and complexity — see our probate avoidance checklist.
Province matters
The saving is only meaningful where probate fees are a percentage of estate value, as in Ontario (~1.5%) or BC (~1.4%). In Alberta, where the fee is capped at $525 regardless of estate size, a trust to avoid probate makes little sense. Match the strategy to your province's fee structure, and use the probate fee calculator to see what is actually at stake.
What we focus on at It's Simple Will
The Will Creator plus current beneficiary designations covers the probate planning that suits most people, without a trust. Where a substantial estate or a specific goal genuinely warrants an alter ego or joint partner trust, that is specialist work for a lawyer and accountant. For the full menu of options, see our probate avoidance checklist.
Related guides
Citations & sources
- [1]Estate Administration Tax (Ontario probate fee) — Government of Ontario
- [2]T3 Trust Guide (T4013) — Canada Revenue Agency
- [3]Income Tax Act, RSC 1985, c 1 (5th Supp) — trusts and rollovers — Justice Laws Website, Government of Canada
Frequently asked questions
Can a family trust avoid probate?
Yes, in the sense that assets owned by a trust are not part of your estate, so they do not pass through probate and are not subject to the probate fee. The trust continues to hold them after your death under its terms. Whether that benefit is worth a trust's cost and complexity is the real question.
Which trust is used for probate planning?
Most often an alter ego or joint partner trust, available to people aged 65 and older. Their advantage is that you can transfer assets into them on a tax-deferred basis (at cost), so funding does not trigger a capital gain — unlike most family trusts, where transferring appreciated property in is a deemed disposition.
Does putting assets in a trust trigger tax?
For most trusts, yes — transferring appreciated capital property in is a deemed disposition at fair market value, which can create a capital gain on funding. Alter ego and joint partner trusts are the exception, allowing a rollover at cost. This is the main reason those particular trusts, not ordinary family trusts, are used to avoid probate.
Is avoiding probate with a trust worth it?
For most people, no. Probate fees are modest — a fraction of estate value — while a trust costs money to set up, requires an annual T3 return, is taxed at the top rate on income it retains, and faces a deemed disposition every 21 years. The trust route suits larger estates or specific goals, not routine probate-fee savings.
Are there simpler ways to reduce probate?
Usually yes. Naming beneficiaries on registered plans and insurance, holding assets jointly where appropriate, and (in some provinces) multiple wills achieve probate savings at far lower cost and risk than a trust. Our probate avoidance checklist sets out the low-risk options most people should consider first.
Does it matter which province I'm in?
A great deal. The probate saving is meaningful only where fees are a percentage of estate value, such as Ontario or British Columbia. In Alberta, where probate fees are capped at $525, using a trust to save probate makes little sense. Match the strategy to your province's fee structure.