CanadaCan I create a trust to protect assets from creditors?
In Canada, you generally cannot create a trust solely to shield assets from existing creditors — courts may set it aside as a fraudulent conveyance. Only certain properly structured trusts (e.g., discretionary family trusts with independent trustees) may offer limited protection, but not against claims that arose before the trust was created.
What the Law Says
Canadian law does not permit using trusts to defraud or hinder creditors. While the Trust and Loan Companies Act authorizes trust companies to act as trustees, it does not authorize asset protection trusts designed to evade legitimate debt obligations.
The Trust and Loan Companies Act permits trust companies to serve as trustees, but it says nothing about using trusts to avoid creditors. Asset protection depends instead on provincial property law, bankruptcy law, and the federal Bankruptcy and Insolvency Act.
Under common law and provincial legislation (e.g., the Fraudulent Conveyances Act in many provinces), a trust created with the intent to defeat creditors — especially those whose claims existed before the trust was formed — can be declared void or set aside by a court.
Even a validly created trust offers no automatic protection: if you retain control, benefit, or the power to revoke, courts may treat the assets as still yours for creditor purposes.
Statutory TextA trust company may act as executor, administrator, trustee, or guardian and perform all functions ancillary thereto.
— Trust and Loan Companies Act, s. 57 — Corporate powers — trust company
What to Do
Consult a Canadian lawyer before transferring assets into a trust — timing, control, and intent matter legally.
Avoid creating a trust after a debt is incurred or litigation is threatened — this raises red flags for fraud.
Consider a discretionary family trust with independent trustees and no fixed entitlements — it offers stronger (but not guaranteed) protection.
Disclose trust assets honestly in any bankruptcy or insolvency proceeding — hiding assets can lead to criminal penalties.
Sources
Not legal advice. This article is general information based on publicly available sources, written for educational purposes. Laws change and individual situations vary. Consult a licensed attorney in your jurisdiction before acting on anything you read here. Last reviewed: 2026-06-08.