Can a Verbal Promise Create a Trust Over Property in Ontario?

A common estate dispute starts with a sentence like this: Dad said he was only holding the house for me, or Mom told me the money was always mine. Nothing was written down, and now the estate is being divided.

This article explains the ideas behind these claims in plain terms, the time limits and court tools in Ontario that are relevant, and how to organize your evidence. It does not state when an oral or informal trust will be enforced, because that depends on the facts and a lawyer should assess it.

What the claim is really about

A trust is an arrangement where one person holds property for the benefit of another. People sometimes say they were promised that a house, account or investment was held for them, even though title or the account is in the deceased's name.

A bare trust, for example, is an arrangement where the trustee can reasonably be considered to act as agent for all the beneficiaries and has no significant powers or responsibilities. Whether your situation fits any kind of trust is the question a court would look at.

For tax purposes, a testamentary trust is generally created on and because of a person's death, and an inter vivos (living) trust is any trust that is not a testamentary trust. Which description fits an informal arrangement depends on the facts, so it is worth confirming with a lawyer or accountant.

Why evidence is the hard part

Without a written document, a claim rests on other proof. The person who made the promise has died, which makes things harder. Courts look at the whole picture, so organize what you have.

• Bank records showing who paid for the property, taxes or upkeep.
• Emails, texts, cards or letters that mention the arrangement.
• People who heard the promise or saw how the property was treated.
• Documents showing how the property was registered and why.

How it affects the estate

For Estate Administration Tax, Ontario includes in the estate value any property the deceased owned that was held in another person's name. Putting legal title in another name does not by itself remove a beneficially owned asset from the tax.

Assets that pass outside the estate are excluded from the tax value, such as assets with a named beneficiary, jointly owned assets that automatically go to the surviving owner, and real estate outside Ontario. If you are an estate trustee, a competing claim to a house can affect what you report and distribute, so get advice before you sell or divide it.

Tax reporting is a separate question. Bare trusts do not have to file a T3 return for tax years ending after December 31, 2024 and before December 31, 2026, but for years ending on or after December 31, 2026, reportable bare trusts are subject to the trust reporting rules and may have to file. Some arrangements are not reportable, such as related individuals holding legal title to real property that would be a beneficiary's principal residence, like a parent on title so a child can get a mortgage. An accountant can confirm how this applies to you.

Time limits and court tools

The general limitation period in Ontario is two years from the day a claim was discovered. A claim is discovered when the claimant knew, or reasonably ought to have known, of it. No proceeding may be started more than 15 years after the act or omission. That 15-year period does not run while the defendant wilfully conceals the loss, and the claimant must prove the concealment.

The two-year period does not run while the claimant is a minor, or is incapable of starting a proceeding, and is not represented by a litigation guardian. Tort actions by or against a deceased person's executor or administrator must be brought within two years of the death.

• A trustee may apply to the Superior Court of Justice, without starting an action, for the court's opinion, advice or direction on managing trust property.
• A person who appears to have a financial interest in an estate may bring a motion for an order requiring the estate trustee to pass accounts.
• The Superior Court of Justice may remove a personal representative on any ground on which it could remove any other trustee.

To pass accounts, the trustee files the accounts verified by affidavit, a copy of the certificate of appointment, and any earlier judgment on passing of accounts, and the court then issues a notice of application to pass accounts. A beneficiary who objects must serve and file a notice of objection to accounts at least 35 days before the hearing date. Which deadline applies to your claim is a legal question, so do not wait to find out.

What to do next

• Write down exactly what was promised, by whom, when, and who else knows.
• Collect records of payments and any messages that mention the arrangement.
• Note the date of death and the date you first learned the estate might treat the property as its own.
• Do not sell, mortgage or divide the property until you have advice.
• Speak to a lawyer soon about time limits and your options.

Frequently asked questions