A stepmother sold trust property, pocketed all proceeds, and argued that the trust was a “sham.” The court’s ruling revealed the truth.
Background of the Case
In 2012, to hold a cottage in Youngstown, New York State, USA, Mr. Morris specially retained a U.S. specialist trust attorney to draft the “Morris Guy Jones Family Trust.” He explicitly designated his wife Ms. Vaska as the initial trustee and beneficiary, with his son from a previous marriage Mr. Brendan and his descendants as additional beneficiaries. Subsequently, he purchased the cottage through a joint loan account with Ms. Vaska for $850,000, and formally registered the property title under the trust, completing all trust establishment procedures. The trust included a divorce clause: in the event of divorce, Ms. Vaska could obtain general trust assets, automatically resign as trustee, and be removed as a beneficiary.
After nearly 9 years of peace, a dispute arose in June 2021. In her capacity as trustee, Ms. Vaska arbitrarily sold the trust asset, obtaining $850,000 in proceeds plus $75,000 from selling the cottage’s contents. After deducting the amount withheld by the Internal Revenue Service (IRS), she transferred all remaining funds to her joint investment account with Mr. Morris.
Upon discovering this act, Mr. Brendan immediately filed a lawsuit, accusing Ms. Vaska of violating trust terms, misappropriating trust assets, and infringing on the rights of other beneficiaries. Unexpectedly, to retain the assets, Ms. Vaska directly claimed the trust was a “sham,” arguing that it was established solely for tax-saving purposes and thus she had no trust obligations.
The Ontario Superior Court of Justice ultimately ruled that the family trust was legally valid. Mr. Morris had a genuine intention to establish the trust and completed the legal transfer of assets—this was by no means a “sham trust.” As a trustee, Ms. Vaska breached her fiduciary duty of loyalty and seriously defaulted by arbitrarily transferring assets. The court ordered her removal as trustee, full restitution of assets, and submission of complete account records to fully protect the trust and beneficiaries’ rights.
The Three Certainties: The “Iron Triangle” Supporting Trust Validity
The validity of an express trust depends on the classical rule established in Knight v. Knight: the Three Certainties. Like an “iron triangle,” these three principles are indispensable for a trust’s validity.
Ms. Vaska attempted to seize assets by claiming the trust was “sham,” but the court verified the existence of all three certainties through case facts and trust terms. This confirms that a professionally structured trust can serve as a “firewall” for asset security when needed, resisting external encroachments.
A. Certainty of Intention: Genuine Planning, Not a Tax Evasion “Guise”
The settlor must have a genuine intention to create a trust, rather than merely using a trust form to evade taxes, debts, or other statutory obligations.
In this case, each step taken by Mr. Morris—including engaging U.S. trust attorneys, and correspondence in which he expressly stated that the trust’s purpose was to hold the Youngstown property—showed clear intent. He defined beneficiaries and distribution terms with precision. This demonstrates a carefully considered, long-term estate plan balancing family interests.
B. Certainty of Subject Matter: Clear Assets with Legal Transfer
A trust must have clearly identifiable trust property, and the settlor must have completed a valid transfer of that property. These are foundational requirements enabling the trust to stand independently and resist external challenges.
Here, the subject matter was unambiguously defined as the “house in Youngstown, New York.” All transaction documents were executed by the “trustee of the trust,” establishing on the record that legal title had been properly transferred.
Thus, Ms. Vaska’s argument that the trust instrument did not explicitly mention the house, resulting in uncertainty of subject matter, collapsed entirely during trial.
C. Certainty of Objects: Clearly Identifiable Beneficiaries
Trust benefits must be capable of reaching identifiable beneficiaries. This is the “is-or-is-not” test: for any given person, one must be able to determine whether they are or are not a beneficiary.
In this case, the categories of beneficiaries and distribution principles were clearly defined. Accordingly, even Ms. Vaska could not challenge the trust on the basis of uncertainty of objects.
Court’s Conclusion
After reviewing the complete evidence chain confirming the three certainties (intention, subject matter, and objects), the Ontario Superior Court of Justice ultimately ruled that the Morris Guy Jones Family Trust is legally valid. This judgment not only resolved the dispute but also reflects that a trust’s legal effect is rooted in a solid legal framework, rather than a mere paper agreement open to arbitrary challenge.
Therefore, establishing a trust solely for tax-saving purposes does not constitute a “veto factor” for its validity. When determining whether a trust is “sham,” courts always adhere to the principle of “substance over form,” comprehensively examining factors such as the completeness of trust terms, compliance of asset transfers, and the settlor’s actual conduct. They will never reach a hasty conclusion based solely on the “tax-saving” purpose. This means that as long as a trust is established with the assistance of professional teams and meets core legal requirements, it will still receive legal recognition and protection—even if tax-saving is a consideration. Attempts to seize assets or evade obligations by claiming a “sham trust” will ultimately fail in the face of complete evidence chains and rigorous legal scrutiny. A trust’s function of isolating assets and protecting beneficiaries’ rights can still be firmly realized, but this depends on the trust’s proper establishment and professional guidance.