Why Use a Trust in Your Ontario Estate Plan? Seven Reasons to Consider One

Most people think a will is all they need for estate planning. And for many straightforward situations, that is true. But when a simple "divide and distribute" approach does not fit your family's circumstances, a trust — either built into your will or set up during your lifetime — can be the right solution.

Trusts are not just for the wealthy. They are legal tools that solve real problems: protecting vulnerable beneficiaries, reducing taxes, avoiding probate, and ensuring your assets reach the right people at the right time. Here are seven reasons Ontario residents consider including a trust in their estate plan.

1. You Have Minor Children

If you die while your children are still minors, Ontario law does not allow them to receive assets directly. Without a trust, funds go to the Public Guardian and Trustee, administered under government rules, and released in a lump sum at age 18.

A children's trust in your will lets you name your own trustee, control how funds are invested and used, and set a distribution age that makes sense — say, 25 or 30, possibly in stages. You also choose who manages the money, rather than leaving that to a government office with no knowledge of your family.

2. You Have a Beneficiary With a Disability

A family member who receives ODSP or other means-tested government benefits can lose those benefits if they receive an inheritance directly. The monthly support, drug coverage, and dental benefits ODSP provides are difficult to replace.

A Henson trust — named for an Ontario Court of Appeal case — holds assets for the disabled beneficiary under the trustee's absolute discretion, so the assets generally do not count against the beneficiary's ODSP eligibility. The trust supplements, rather than replaces, government support. This is one of the most important uses of a trust in estate planning, and it requires very careful drafting.

3. You Want to Protect Your Surviving Spouse While Guaranteeing Heirs Receive the Estate

In a blended family, leaving everything outright to a surviving spouse creates a risk: that spouse may eventually remarry or change their own will, and your children (from a prior relationship) receive nothing.

A testamentary spousal trust holds assets for your surviving spouse's lifetime, giving them income security. When the surviving spouse dies, whatever remains goes to your named heirs — not the spouse's new partner or their family. It balances care for a surviving spouse with protection of the estate for the next generation.

4. You Want to Avoid (or Reduce) Probate

Assets that pass through your estate at death may be subject to estate administration tax (commonly called probate fees) in Ontario. The rate increases with estate value. As of writing — verify current rates with the Ontario government — this can be a meaningful cost on a large estate.

Assets held in a trust at your death generally pass outside the estate, avoiding probate. Alter ego trusts and joint partner trusts (available to those aged 65 and older) are specifically designed to allow assets to flow to beneficiaries without going through the estate, and with a tax-deferred transfer on the way in. This can also avoid the delay and publicity of the probate process.

5. You Want to Control How and When Beneficiaries Receive Money

A direct inheritance gives a beneficiary a lump sum with no strings attached. For some beneficiaries, this is fine. For others — someone with addiction issues, a history of poor financial decisions, a troubled marriage, or simply youth and inexperience — a direct inheritance can do more harm than good.

A discretionary trust allows a trustee to make distributions in stages, for specific purposes (education, housing), or based on the beneficiary's circumstances at the time. The trustee exercises judgment — guided by your letter of wishes — rather than automatically handing over a cheque.

6. You Want to Protect Assets From a Beneficiary's Creditors or Divorce

When a beneficiary directly receives an inheritance, those assets generally become their property — which means a spouse could claim them in a separation, or a creditor could seize them in a bankruptcy.

Assets held in a properly structured trust may be less accessible to a beneficiary's creditors or spouse, because the beneficiary does not own them — the trustee does, on their behalf. The protection is not absolute and depends heavily on the trust's terms and jurisdiction, but it can provide a meaningful buffer, especially where a beneficiary's financial situation is unstable.

7. You Have a Private Business or Complex Assets

Business owners often need more than a simple will. An estate plan that includes a trust can:

• Hold shares of a private corporation for future generations while a trustee manages voting control
• Facilitate an estate freeze, where current value is locked in for the owner and future growth accrues to beneficiaries in the trust
• Multiply the lifetime capital gains exemption among multiple adult beneficiaries on a business sale
• Provide continuity of ownership if the owner dies or becomes incapacitated

These strategies sit at the intersection of corporate, tax, and estate law, and require coordinated professional advice.

Trusts Are Not Always the Answer

A trust adds complexity and cost — legal fees to draft it, annual tax returns to file, trustee time and (potentially) compensation to pay. For a straightforward estate with adult, financially capable beneficiaries and no special circumstances, a simple will with direct distribution is often the better choice.

The question to ask is: what problem am I trying to solve? If one or more of the seven reasons above resonates with your situation, a trust is worth exploring. If none of them apply, a well-drafted will may be all you need.

Frequently asked questions