Putting Your House in a Trust in Ontario: What to Know

Many homeowners ask whether putting the house into a trust will save probate fees or protect it. The answer depends on the kind of trust, who is on title afterwards, and how you keep living in the home.

This article covers the main points we can state generally. Land transfer tax, lender consent and title insurance are all questions that turn on the specific transfer, so they are best confirmed with a lawyer before you act.

Different trusts, different results

A trust is not one single thing. A living trust is any trust that is not created on and because of a death. Alter ego and joint partner trusts are living trusts created after 1999 by a settlor aged 65 or older, with income entitlements for the settlor, or for the settlor and their spouse or partner.

A bare trust is different again. It 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.

Land transfer tax, your mortgage and title insurance

Transferring a home to a trust is a change in who holds title. Whether land transfer tax applies, whether your lender must consent, and whether your title insurance continues to protect you depend on the type of trust, the terms of your mortgage and your policy. Do not assume the answer is the same as for a transfer to a family member.

• Ask your lender in writing whether a transfer to a trust is allowed under your mortgage.
• Ask your title insurer whether your coverage continues after the transfer.
• Ask your lawyer whether any land transfer tax or other registration cost arises.

Capital gains and the 21-year rule

Generally, a trust is deemed to dispose of its capital property at fair market value every 21 years. For spousal, alter ego and joint partner trusts, the first deemed disposition happens on the day the beneficiary spouse dies, or on the later of the two deaths, instead.

Whether moving the home into the trust triggers tax right away, and whether the principal residence rules help, depends on the kind of trust and the terms. An accountant can confirm this before you transfer.

Estate administration tax and bare trusts

Estate Administration Tax is based on the deceased's property that must be disclosed under the Estates Act, less encumbrances on real property. Assets that pass outside the estate, such as jointly owned assets that automatically go to the surviving owner, are excluded.

However, Ontario includes in the estate value any property the deceased owned that was held in another person's name, and a change of legal title alone does not remove a beneficially owned asset.

Bare trusts do not have to file a T3 return for tax years ending after December 31, 2024 and before December 31, 2026. For years ending on or after December 31, 2026, reportable bare trusts are subject to the trust reporting rules and may have to file. A bare trust is not reportable where related individuals hold legal title to real property that would be a beneficiary's principal residence, such as a parent on title so a child can get a mortgage. It is also not reportable where one spouse or common-law partner holds a shared principal residence for the other.

What to do next

• Write down why you want the home in a trust and what you expect it to do.
• Gather your mortgage terms, title insurance policy and the property's registered title.
• Ask a lawyer which type of trust fits your goals and whether it really changes the estate.
• Ask an accountant about the tax effects, including any T3 filing.
• Do not sign or register a transfer until the lender and insurer questions are answered.

Frequently asked questions