What Is a Family Trust?
A family trust is a legal arrangement where one person or entity (the trustee) holds and manages assets on behalf of others (the beneficiaries). It allows you to separate legal ownership from beneficial use.
In Ontario, trusts are often used by families who want to plan for the future—whether it’s protecting wealth, reducing taxes, or supporting loved ones.
Think of it as a container. You choose what goes inside—cash, investments, property, company shares—and you control how it’s distributed over time.
Two Main Types: Inter Vivos vs. Testamentary
Inter Vivos Trust:
- Created during your lifetime
- Used for income-splitting, tax planning, and asset protection
- Must file annual trust returns
- Offers flexibility and control while you’re alive
Testamentary Trust:
- Created through your will, takes effect upon death
- Used for minors, vulnerable beneficiaries, or specific inheritance goals
- Subject to different tax rules than inter vivos trusts
Choosing the right type depends on your objectives, timeline, and tax position.
Key Benefits of a Family Trust
Tax Planning:
Allows for income-splitting among beneficiaries in lower tax brackets, reducing the overall family tax burden.
Asset Protection:
Helps shield assets from creditors, lawsuits, or family breakdown (e.g., divorce).
Succession Planning:
Can hold shares of a business and distribute them over time or based on conditions.
Disability or Special Needs Support:
Used to provide ongoing financial care without jeopardizing government benefits.
When Should You Consider Setting Up a Trust?
- You own a private corporation and want to transfer future growth to your children
- You have children under 18 and want to delay inheritance access
- You want to provide for a child or spouse with a disability
- You’re concerned about future divorce or creditor issues
- You plan to do an estate freeze or share reorganization
Common Misconceptions About Trusts
Many people think trusts are only for the ultra-wealthy. Not true.
What matters is your goals—not your net worth. A dentist, real estate investor, or incorporated consultant can benefit just as much as a multimillionaire.
Another myth: trusts are too complex or expensive. While they do involve planning and annual filings, the value they protect can far exceed the cost.
Real Example: Keeping the Cottage in the Family
One client had a vacation cottage they wanted to pass to their children—but worried about future divorce claims and tax hits.
We created an inter vivos trust that:
- Held the cottage outside the personal estate
- Allowed use by all family members under conditions
- Protected it from creditors and marital division
- Ensured fair access and upkeep responsibilities
How to Set Up a Family Trust in Ontario
- Choosing the right trustee(s): individuals or professionals you trust to carry out your intentions
- Naming beneficiaries and outlining how they’ll benefit
- Drafting a legal trust agreement with help from a lawyer
- Coordinating with your accountant for tax filings and CRA registration
- In some cases, obtaining a business valuation if transferring shares
Why Now Is the Right Time to Start
The longer you wait, the fewer options you may have. Family trusts are most effective when implemented early—before major asset growth, family changes, or business transitions.
Final Thoughts: Customize Your Trust to Fit Your Life
There’s no one-size-fits-all trust. Each family, each asset, each objective is unique.
At Chiummiento Law, we help clients across Ontario integrate trusts into their estate and tax plans—from setup through annual compliance.
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📍 Based in Vaughan | Serving clients in Toronto, the GTA, and all provinces and territories in Canada
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joseph@chiummiento.com
