As much as a lawyer may try to focus and specialize on one area of law, there is inevitably a degree of overlap. Especially, where trusts are concerned. Here, we will briefly touch on some difficulties to bear in mind when dealing with trusts in the context of family law.

A beneficiary of a trust only has an interest in trust property as legal ownership is held by the trustee. This, however, is changed in a family law context by Section 4(1) of the Family Law Act, which encompasses any interest “present or future, vested or contingent” in the definition of property. Therefore, trust property can be considered marital property.

This expanded definition of property can cause difficulties when dividing marital property. In Ontario, when married couple separate, the parties calculate their net family property and the person with the higher net family property pays the other party half the difference. However, some types of property, such as that obtained by way of a gift, are excluded from one’s net family property.

A difficulty arises when considering property held in a trust as all trust property is necessarily “gifted” to the trustee by the settlor for the benefit of the beneficiaries.

In Tremblay v. Tremblay, 2016 ONSC 588, the court outlined the factors to consider when determining whether to include trust property in one’s net family property. The court highlighted the history of care and control of the trust, the relationship between the beneficiary and trustee, and the rules governing the trustee’s powers and position. Ultimately, the court noted that it would look at factors that would turn an expected benefit “into something more of a certainty” (para. 38).

Determining whether trust property forms part of one’s net family property is extremely complex and the caselaw varies widely based on the circumstances. This difficulty is compounded when considering a discretionary trust as the beneficiaries’ interests are not easily defined.

These difficulties highlight the need for a lawyer with expertise in trust matters when drafting trust documents or litigating matters relating to trusts.