Can a family trust really insulate wealth from equalization? This decision unpacks when a trust crosses the line from legitimate estate planning tool to sham device, and how retained control, commingling of assets, and the absence of the three certainties can render a trust void and its assets eligible for NFP purposes.
Background
Delia Resendes (“Delia” or the “Applicant”) and Arnaldo Maciel (“Arnaldo” or the “Respondent”) began cohabiting in September 2002 and had two children together: Joshua and Alexander.[1] The Respondent had been previously married, and had two adult sons from this previous union.[2] Delia and Arnaldo were married on July 9, 2016, and separated on September 1, 2019.[3]
The Court observed that, although the marriage was a short and somewhat unstable three years, the parties cohabited for a total of 17 years.[4] The Respondent was the primary income earner for the family, and the evidence demonstrated that the Applicant was primarily a stay-at-home mother.[5]
In 2011, five years prior to the party’s marriage, the Respondent settled a family trust (“the Trust”), and most of the various real properties held, acquired, and owned by the Respondent prior to his marriage were transferred by the Respondent into the Trust (not including the matrimonial home) for a Promissory Note.[6]
The Trust named the Respondent as the sole trustee, and the parties’ two children and one of the Respondent’s older children from his previous marriage as the beneficiaries.[7] The Applicant was not named as a beneficiary or trustee.[8]
At separation, the Applicant owned nothing and had no investments or savings in her name.[9] At separation, the Respondent remained solely on title to the matrimonial home. All other real estate assets remained in the Respondent’s name solely in his capacity as trustee for the Trust.
Parties Positions
The Applicant’s position is that the Trust was created to hide the Respondent’s true income and to defeat any equalization claim and/or creditors. The Applicant’s concerns arise by virtue of the close connection between the Trust and the Respondent’s business. The Applicant contends that the Trust is a mechanism of the Respondent’s family business.[10] She suspects that the Respondent is using the Trust for his own benefit and to hide and protect his wealth by effectively decreasing his income and his NFP (which could be in the millions). She asks that the court declare the Trust a “Sham” and order that all of the assets that are held in the Trust be included in the Respondent’s NFP.
The Respondent vehemently opposes the Applicant’s assertions and takes the position that the Trust is valid and that none of the assets should be included in his NFP calculation.
Analysis – The Trust
The Court begins by reviewing and elaborating upon the essential elements of the Trust as briefly discussed above. Importantly, for later in the analysis, the Court identifies that the Trust was Settled by a lawyer, Mr. Cohen, for nominal consideration of $5.00.[11] The Court notes that Respondent was appointed as original sole Trustee and remains the sole Trustee to this day.[12] Further, the Court observes that the property issues are complex, to say the least, the Court details the following:
the real properties that he transferred to the Trust for the Promissory Note on December 23, 2011; the subsequent forgiveness of the Promissory Note on February 15, 2013; and the Respondent’s decision to loan to the Trust the amount of $975,000, which was borrowed directly against the parties’ matrimonial home located at 283 Beach Road, which was registered in the Respondent’s sole name.[13]
In reviewing the applicable law as it pertains to sham trusts, the Court finds that if the Trust is deemed to be a sham, it will be void, meaning that it is treated as if the trust never existed, and the assets held in trust revert to the trustee.[14]
Voir Dire on Expert Trust Evidence
Mr. Ian Hull (“Mr. Hull”) was called as an expert trust witness wherein he submitted a report (the “Hull Report”) that reviewed the law of trusts in Canada and provided a basic overview of valid trust constitution.[15] The Hull report was subjected to a voir dire wherein the Applicant challenged its admissibility and validity, arguing it was not objective or impartial.[16]
At the conclusion of the voir dire, the Court found the following:
The Hull Report and Mr. Hull’s evidence are and were undeniably relevant to this trial. There is precedent for calling a lawyer to give evidence on legal issues where the area of law is sufficiently specialized and the evidence is necessary to assist the court. Trusts are complex, and the court would and did benefit from the knowledge and expertise of Mr. Hull to assist the trial judge in understanding how a trust is validly created, the factors that a court should consider in determining the validity of a trust, and the indicia of a sham trust. The Applicant did not question the qualifications of Mr. Hull as an expert. Neither did the court. Mr. Hull was and is qualified to express an expert opinion. For these reasons and the reasons given orally, I found that the Hull Report and Mr. Hull’s evidence were relevant and necessary and that Mr. Hull was qualified to provide evidence to the court.[17]
Based on the above, the Court partially admitted the Hull Report and permitted Mr. Hull to give evidence.
Validity of the Trust & The Emphasis on Intention
In analyzing the certainty of intention, the Court begins by finding that Mr. Hull correctly stated that, “the certainty of intention ‘refers to the intention on the part of the person transferring the property (i.e., the Settlor) to create a trust. The expression of intention to create a trust can be oral or written’”.[18]
The Court then precludes Mr. Hull from providing opinion evidence as to the Respondent’s intention (as there is dispute that the Respondent was not the Settlor). Although the Court accepted Mr. Hull’s evidence that certainty of intention refers only to the Settlor, the Court also held that a determination of the Respondent’s intention must be examined as he later transferred real property into the Trust.[19]
The Court relies on Re McGoey for the proposition that intention is to be assessed on the evidence of the Respondent’s intention at the time the Trust was created, but conduct following the settlement of the Trust may also be taken into account.[20] Further, the Court relied on McGoey for it updated interpretation/ application of the Sham Trust Analysis. In this case, the court held that two purported trusts holding real property were void as being sham trusts on the basis that the trustees’ use of the trust property could not be distinguished from that of an owner and there was no restriction on their use of the properties as a result of the trusts.[21]
Is the Trust a Sham? Assessing the Evidence of Intention
The Court found, that despite the language of the Trust Deed, the evidence conclusively demonstrates that the Respondent considered himself to have retained control of the assets purportedly held in Trust. “In his own mind, he had not separated himself from the beneficial interest in the shares. Accordingly, there was no intention to create a valid trust as one of the three certainties was missing and the trust is therefore void.”. This being a relevant quote for the finding of a Sham as per Duca.[22]
Mr. Hull stated that a “sham trust” is “a trust for appearance only, designed to shield assets from the transferor’s creditors, which may, in the case of a family trust in particular, include a separating spouse who seeks an interest in his or her assets through an equalization of NFP.”[23]
When a trust has been found to be a sham, the subject matter of the “Trust” owned by the trustee for the benefit of the trust, revert back to the trustee.[24]
In determining whether the purported trust is a sham, the Court acknowledged that it is a fact-specific determination and insodoing, the Court relied on Mr. Hull’s evidence of common indicia, for example:
(a) There is no commercial logic to using a trust;
(b) The trust agreement post-dates the transfer of funds;
(c) There is no written trust settlement;
(d) There is no segregation of trust funds;
(e) The trustee fails to keep proper accounts;
(f) The trust does not file income taxes;
(g) The trustee mixes the trust funds with other funds;
(h) The trustee pre-takes compensation;
(i) The trustee takes compensation and does not declare that amount as income;
(j) The trustee makes advances (especially to himself or herself) without documentation.[25]
The Court considered in-depth evidence and arguments regarding factors (d) lack of segregation of funds, (e) lack of keeping proper accounts, (g) mixing of trust funds with other funds, (h) pre-taking compensation, (i) not declaring compensation as income, and (j) making advances without documentation.[26]
Ultimately, the Court found that Respondent has total control over the Trust assets, and he treats Trust property as his own, and redirects Trust property to himself in breach of his fiduciary duties, and with zero oversight of same.[27] As such, the Court found the Trust to be a sham, designed for appearance only, to shield the Respondent’s assets and income from the Respondent’s creditors.[28]
Final Remarks
This decision underscores that the validity of a family trust in the family law context will turn not on the language of the trust deed alone, but on whether the settlor truly divested themselves of control consistent with the three certainties.
Where a spouse retains effective dominion over purported trust assets, commingles funds, fails to observe trust formalities, or treats trust property as their own, the court may find the arrangement to be a sham, rendering the trust void ab initio. In such circumstances, assets ostensibly shielded within the trust may be deemed to revert to the trustee and be included in the spouse’s Net Family Property for equalization purposes, notwithstanding their formal transfer to the trust structure.
—
[1] Resendes v. Maciel, 2025 ONSC 3263 (CanLII), at para 2. (“Resendes v Maciel”)
[2] Ibid., at para 8.
[3] Ibid., at para 2.
[4] Ibid., at para 8.
[5] Ibid., at paras 10-11.
[6] Ibid. at para 12.
[7] Ibid., at para 24.
[8] Ibid.
[9] Ibid.
[10] Ibid., at para 26.
[11] Ibid., at para 34.
[12] Ibid.
[13] Ibid., at para 35.
[14] Ibid., at para 36; citing McGoey (Re), 2019 ONSC 80 (CanLII) (“McGoey”), and DUCA Financial Services Credit Union Ltd. v. Bozzo, 2010 ONSC 4601 (CanLII).
[15] Ibid., at para 37
[16] Ibid., at para 38
[17]Ibid., at para 39
[18]Ibid., at para 45
[19] Ibid., at para 43
[20] Ibid.; citing McGoey at para 40
[21] Ibid., at para 43; McGoey at 44.
[22] Ibid., at para 44; Duca, at para 5
[23] Ibid., at para 46
[24] Ibid.
[25] Ibid., at para 47
[26] Ibid., at para 49, see paras 50-95 as well.
[27] Ibid., at paras 97.
[28] Ibid., at para 129.
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Written by: Grant Swedak
Posted on: February 18, 2026
Categories: Commentary
Can a family trust really insulate wealth from equalization? This decision unpacks when a trust crosses the line from legitimate estate planning tool to sham device, and how retained control, commingling of assets, and the absence of the three certainties can render a trust void and its assets eligible for NFP purposes.
Background
Delia Resendes (“Delia” or the “Applicant”) and Arnaldo Maciel (“Arnaldo” or the “Respondent”) began cohabiting in September 2002 and had two children together: Joshua and Alexander.[1] The Respondent had been previously married, and had two adult sons from this previous union.[2] Delia and Arnaldo were married on July 9, 2016, and separated on September 1, 2019.[3]
The Court observed that, although the marriage was a short and somewhat unstable three years, the parties cohabited for a total of 17 years.[4] The Respondent was the primary income earner for the family, and the evidence demonstrated that the Applicant was primarily a stay-at-home mother.[5]
In 2011, five years prior to the party’s marriage, the Respondent settled a family trust (“the Trust”), and most of the various real properties held, acquired, and owned by the Respondent prior to his marriage were transferred by the Respondent into the Trust (not including the matrimonial home) for a Promissory Note.[6]
The Trust named the Respondent as the sole trustee, and the parties’ two children and one of the Respondent’s older children from his previous marriage as the beneficiaries.[7] The Applicant was not named as a beneficiary or trustee.[8]
At separation, the Applicant owned nothing and had no investments or savings in her name.[9] At separation, the Respondent remained solely on title to the matrimonial home. All other real estate assets remained in the Respondent’s name solely in his capacity as trustee for the Trust.
Parties Positions
The Applicant’s position is that the Trust was created to hide the Respondent’s true income and to defeat any equalization claim and/or creditors. The Applicant’s concerns arise by virtue of the close connection between the Trust and the Respondent’s business. The Applicant contends that the Trust is a mechanism of the Respondent’s family business.[10] She suspects that the Respondent is using the Trust for his own benefit and to hide and protect his wealth by effectively decreasing his income and his NFP (which could be in the millions). She asks that the court declare the Trust a “Sham” and order that all of the assets that are held in the Trust be included in the Respondent’s NFP.
The Respondent vehemently opposes the Applicant’s assertions and takes the position that the Trust is valid and that none of the assets should be included in his NFP calculation.
Analysis – The Trust
The Court begins by reviewing and elaborating upon the essential elements of the Trust as briefly discussed above. Importantly, for later in the analysis, the Court identifies that the Trust was Settled by a lawyer, Mr. Cohen, for nominal consideration of $5.00.[11] The Court notes that Respondent was appointed as original sole Trustee and remains the sole Trustee to this day.[12] Further, the Court observes that the property issues are complex, to say the least, the Court details the following:
the real properties that he transferred to the Trust for the Promissory Note on December 23, 2011; the subsequent forgiveness of the Promissory Note on February 15, 2013; and the Respondent’s decision to loan to the Trust the amount of $975,000, which was borrowed directly against the parties’ matrimonial home located at 283 Beach Road, which was registered in the Respondent’s sole name.[13]
In reviewing the applicable law as it pertains to sham trusts, the Court finds that if the Trust is deemed to be a sham, it will be void, meaning that it is treated as if the trust never existed, and the assets held in trust revert to the trustee.[14]
Voir Dire on Expert Trust Evidence
Mr. Ian Hull (“Mr. Hull”) was called as an expert trust witness wherein he submitted a report (the “Hull Report”) that reviewed the law of trusts in Canada and provided a basic overview of valid trust constitution.[15] The Hull report was subjected to a voir dire wherein the Applicant challenged its admissibility and validity, arguing it was not objective or impartial.[16]
At the conclusion of the voir dire, the Court found the following:
The Hull Report and Mr. Hull’s evidence are and were undeniably relevant to this trial. There is precedent for calling a lawyer to give evidence on legal issues where the area of law is sufficiently specialized and the evidence is necessary to assist the court. Trusts are complex, and the court would and did benefit from the knowledge and expertise of Mr. Hull to assist the trial judge in understanding how a trust is validly created, the factors that a court should consider in determining the validity of a trust, and the indicia of a sham trust. The Applicant did not question the qualifications of Mr. Hull as an expert. Neither did the court. Mr. Hull was and is qualified to express an expert opinion. For these reasons and the reasons given orally, I found that the Hull Report and Mr. Hull’s evidence were relevant and necessary and that Mr. Hull was qualified to provide evidence to the court.[17]
Based on the above, the Court partially admitted the Hull Report and permitted Mr. Hull to give evidence.
Validity of the Trust & The Emphasis on Intention
In analyzing the certainty of intention, the Court begins by finding that Mr. Hull correctly stated that, “the certainty of intention ‘refers to the intention on the part of the person transferring the property (i.e., the Settlor) to create a trust. The expression of intention to create a trust can be oral or written’”.[18]
The Court then precludes Mr. Hull from providing opinion evidence as to the Respondent’s intention (as there is dispute that the Respondent was not the Settlor). Although the Court accepted Mr. Hull’s evidence that certainty of intention refers only to the Settlor, the Court also held that a determination of the Respondent’s intention must be examined as he later transferred real property into the Trust.[19]
The Court relies on Re McGoey for the proposition that intention is to be assessed on the evidence of the Respondent’s intention at the time the Trust was created, but conduct following the settlement of the Trust may also be taken into account.[20] Further, the Court relied on McGoey for it updated interpretation/ application of the Sham Trust Analysis. In this case, the court held that two purported trusts holding real property were void as being sham trusts on the basis that the trustees’ use of the trust property could not be distinguished from that of an owner and there was no restriction on their use of the properties as a result of the trusts.[21]
Is the Trust a Sham? Assessing the Evidence of Intention
The Court found, that despite the language of the Trust Deed, the evidence conclusively demonstrates that the Respondent considered himself to have retained control of the assets purportedly held in Trust. “In his own mind, he had not separated himself from the beneficial interest in the shares. Accordingly, there was no intention to create a valid trust as one of the three certainties was missing and the trust is therefore void.”. This being a relevant quote for the finding of a Sham as per Duca.[22]
Mr. Hull stated that a “sham trust” is “a trust for appearance only, designed to shield assets from the transferor’s creditors, which may, in the case of a family trust in particular, include a separating spouse who seeks an interest in his or her assets through an equalization of NFP.”[23]
When a trust has been found to be a sham, the subject matter of the “Trust” owned by the trustee for the benefit of the trust, revert back to the trustee.[24]
In determining whether the purported trust is a sham, the Court acknowledged that it is a fact-specific determination and insodoing, the Court relied on Mr. Hull’s evidence of common indicia, for example:
(a) There is no commercial logic to using a trust;
(b) The trust agreement post-dates the transfer of funds;
(c) There is no written trust settlement;
(d) There is no segregation of trust funds;
(e) The trustee fails to keep proper accounts;
(f) The trust does not file income taxes;
(g) The trustee mixes the trust funds with other funds;
(h) The trustee pre-takes compensation;
(i) The trustee takes compensation and does not declare that amount as income;
(j) The trustee makes advances (especially to himself or herself) without documentation.[25]
The Court considered in-depth evidence and arguments regarding factors (d) lack of segregation of funds, (e) lack of keeping proper accounts, (g) mixing of trust funds with other funds, (h) pre-taking compensation, (i) not declaring compensation as income, and (j) making advances without documentation.[26]
Ultimately, the Court found that Respondent has total control over the Trust assets, and he treats Trust property as his own, and redirects Trust property to himself in breach of his fiduciary duties, and with zero oversight of same.[27] As such, the Court found the Trust to be a sham, designed for appearance only, to shield the Respondent’s assets and income from the Respondent’s creditors.[28]
Final Remarks
This decision underscores that the validity of a family trust in the family law context will turn not on the language of the trust deed alone, but on whether the settlor truly divested themselves of control consistent with the three certainties.
Where a spouse retains effective dominion over purported trust assets, commingles funds, fails to observe trust formalities, or treats trust property as their own, the court may find the arrangement to be a sham, rendering the trust void ab initio. In such circumstances, assets ostensibly shielded within the trust may be deemed to revert to the trustee and be included in the spouse’s Net Family Property for equalization purposes, notwithstanding their formal transfer to the trust structure.
—
[1] Resendes v. Maciel, 2025 ONSC 3263 (CanLII), at para 2. (“Resendes v Maciel”)
[2] Ibid., at para 8.
[3] Ibid., at para 2.
[4] Ibid., at para 8.
[5] Ibid., at paras 10-11.
[6] Ibid. at para 12.
[7] Ibid., at para 24.
[8] Ibid.
[9] Ibid.
[10] Ibid., at para 26.
[11] Ibid., at para 34.
[12] Ibid.
[13] Ibid., at para 35.
[14] Ibid., at para 36; citing McGoey (Re), 2019 ONSC 80 (CanLII) (“McGoey”), and DUCA Financial Services Credit Union Ltd. v. Bozzo, 2010 ONSC 4601 (CanLII).
[15] Ibid., at para 37
[16] Ibid., at para 38
[17]Ibid., at para 39
[18]Ibid., at para 45
[19] Ibid., at para 43
[20] Ibid.; citing McGoey at para 40
[21] Ibid., at para 43; McGoey at 44.
[22] Ibid., at para 44; Duca, at para 5
[23] Ibid., at para 46
[24] Ibid.
[25] Ibid., at para 47
[26] Ibid., at para 49, see paras 50-95 as well.
[27] Ibid., at paras 97.
[28] Ibid., at para 129.
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