Setting Up a Trust for Minor Children in Your Ontario Will

If you have children under 18, your will needs to answer a critical question: what happens to your estate if both you and your spouse die before your children are adults? Without a proper plan, the answer is provided by Ontario law — and it may not be the answer you would choose.

A children's trust built into your will is the most important planning step parents can take. It controls who manages the money, how it is invested, and when and how your children actually receive it. This article explains how such a trust works, what you can customize, and why leaving assets directly to a minor is almost never the right approach.

What Happens Without a Trust?

In Ontario, minors cannot legally own property above a modest threshold (as of writing — verify the current amount). If a minor stands to receive an inheritance from your estate and no trust is in place:

• The inheritance is paid to the Office of the Public Guardian and Trustee (PGT), which administers it under provincial rules
• The PGT charges fees, invests conservatively, and follows its own guidelines — not yours
• At age 18, the child receives the full amount, regardless of maturity

Many parents are troubled by this outcome — especially the idea of an 18-year-old receiving a potentially large sum with no restrictions. A trust in your will takes control of what happens.

How a Children's Trust Works in a Will

When you include a children's trust in your will, you specify:

1. Who manages the money — the trustee (not the Public Guardian)
2. How money can be used before the child reaches the distribution age — for education, health, maintenance, and general welfare
3. When the child receives the money outright — a common approach is staged: one-third at 25, one-third at 30, balance at 35; but you can design any schedule
4. What happens if the child dies before receiving everything — typically to their own children, or back to the estate

The trust takes effect only if both parents are dead before the child reaches the distribution age. If both parents survive until the child is an adult, the trust never becomes active.

Choosing a Distribution Age — and Structure

Ontario law says a minor cannot hold property. But the more important planning question is: what age do you trust your child with a large sum?

Most estate lawyers suggest ages between 25 and 35. Here is the logic:

• 18: legally an adult, but rarely financially mature
• 25: most people have some life experience, have finished post-secondary education
• 30: typically professionally established, may own property or have a family
• 35: significant maturity; many parents feel comfortable with full distribution at this age

Staged distributions are popular: instead of one lump sum, you release the trust in tranches. "One-third at 25, one-third at 28, balance at 32" is a common structure. This limits the risk of one bad financial decision wiping out the entire inheritance.

You can also build in discretionary capital: the trustee can use trust funds before the distribution age for the child's education, health emergencies, or even a down payment on a first home. The trustee's judgment (guided by your letter of wishes) governs these decisions.

Choosing a Trustee for a Children's Trust

The trustee of your children's trust holds a significant position. They will:

• Manage and invest the trust assets (subject to the prudent investor standard under Ontario's Trustee Act)
• Make spending decisions from the trust for the child's benefit
• File annual T3 trust returns with CRA
• Keep records and account to the beneficiaries (and eventually to the court, if asked)

Common choices:

• A trusted family member (sibling, grandparent, close friend) — personal, low cost, but may lack investment expertise
• A professional trustee (trust company) — expert management, no personal relationship, annual fees
• Co-trustees — a family member and a professional together, combining relationship knowledge with expertise

Make sure your first choice trustee knows they are named, agrees to serve, and has a clear picture of your wishes. Name a backup trustee in case your first choice predeceases you or cannot serve.

The Trustee Is Not the Guardian

An important distinction: the person who raises your children (the guardian, named in your will) and the person who manages their money (the trustee) do not have to be the same person.

In fact, many estate planners recommend keeping these roles separate. The guardian focuses on the child's day-to-day wellbeing. The trustee manages money and periodically reviews distributions with the guardian. Each provides a check on the other.

If the same person serves as both guardian and trustee, there is no independent oversight — which is sometimes fine, but is worth thinking through carefully.

A Letter of Wishes

A letter of wishes is a personal, non-binding letter you leave alongside your will. It might explain:

• Your values around money and education
• Whether you want the trust used for university tuition vs. trades training
• How you hope the trustee approaches relationships with your children
• Specific wishes for family heirlooms or sentimental items

Because it is not legally binding, it does not create legal obligations on the trustee. But it guides their judgment and gives your trustee insight into what you actually wanted — something the will itself rarely captures.

Tax Considerations

A children's trust is a testamentary trust and files its own T3 tax returns. As of writing, income earned in the trust is generally taxed at the trust level at the highest marginal rate (except during the estate's Graduated Rate Estate period). However, the trust can attribute taxable income to the child-beneficiary when it distributes income to them — verify current attribution rules with a tax professional, as the "kiddie tax" rules apply differently depending on the child's age and the nature of the income.

Frequently asked questions