September 15th 2025
When we think about a trust agreement, we must first consider that property ownership can be divided into legal ownership and beneficial ownership. Legal ownership means the person's name is formally recorded on ownership documents and is recognized publicly or contractually as the owner of the asset or land. Beneficial ownership, on the other hand, refers to the individual who enjoys or utilises the property, including any financial gains the property creates. In many cases, such as in home ownership, the same person is the legal and beneficial owner. However, situations arise—especially in real estate —where a trust is established, making the property’s formal owner different from its beneficiary. This article explores trust agreements specifically in the context of home ownership. If you are a parent and own your own home, or have a child who needs you to cosign on the ownership, this article will help you understand your legal options.
Trust agreements can be oral or written, but it’s always advisable to have a lawyer prepare a clear, written document. Trust agreements can be used to outline responsibilities, such as who provided capital and who is obligated to manage the property. One common setup is a “bare trust,” where the trustee holds legal title but acts solely at the direction of the beneficiary. For example, parents might hold legal title to help a child finance a first home, but the child enjoys all the benefits and takes on all ownership obligations and proceeds of sale. A written bare trust agreement can be crucial for maximising tax rebates, including Ontario’s Land Transfer Tax rebate for first-time buyers, while also ensuring that parents who have contributed funds have their investment protected. Since there can be tax implications with trust agreements, understanding any tax liabilities is important, so it is recommended to speak with a tax specialist.
Trust agreements are also effective in estate planning. Adding a trustee as a joint legal owner to a home allows the property owner to retain enjoyment of their home while they are alive, with the trustee responsible for selling or transferring the property upon their death. This can help avoid lengthy probate procedures and minimise estate taxes. Anyone considering a trust for property ownership or estate planning should consult experienced legal and financial advisors to choose the best strategy.
Michael Liddiard, BA MA JD
(905) 932-5437
michael@liddiardlaw.ca
Liddiard Law Professional Corporation