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Wednesday, December 19, 2012

Who is the trustee of the trust for a minor child?

The following question from a reader asks about the logistics of administering a trust for a minor child. As you will see, a properly drafted will is the key to this arrangement running smoothly. Here's the question:

My aunt left a will for me and my children, both minors, 15/13 yr old. If their funds are held under a trust, who will be their trustee? Is it their mother or anyone that is appointed by the executor? If funds are held until minors are 18 years old, can the parent use the funds before they turn 18? Can my aunt or friends be the trustee if the parents of minor are still alive?When funds are left to a minor in a will, the will itself is the guide to how the trust is going to be set up and administered. The trustee of all trusts in a will is the executor and trustee of the estate, unless the will specifically says something different. For example, some people who are leaving large trusts behind will name a trust company to manage the trust to ensure that it's done properly and honestly. This can happen even when the trust company is not an executor.

In your question, you ask whether the trustee is someone appointed by the executor. You'll note that the trustee is not appointed by the executor, it IS the executor, unless as I said, the will specifies someone else. In some circumstances, it could be the Public Trustee for the province.

It's interesting that you ask whether someone else can be the trustee if the minor's parents are still alive. This has nothing at all to do with the parents. It's all about a gift coming from an estate and that gift isn't given to the parent. It's going to a child, by way of a trustee. And yes, that trustee can be anyone who is named in the will. In your case, it can't be the aunt because you said it's her will, so presumably the trust isn't created until she has passed away. It could, however, be friends or siblings. The parents do not have the right to be a trustee just because the beneficiary is their child. It isn't their money so they have no right to it. In fact, plenty of trusts are set up with specific instructions that the child's parents never, under any circumstances, be made the trustee.

The will should also state the age at which the minor is supposed to inherit the money. While the child can't inherit while he or she is under the age of majority, the will can specify a later age. Don't assume the minor will inherit on his or her 18th birthday; the will might say age 21 or even older. The age set out in the will is the age the child will inherit. I've seen people set up trusts for individuals who won't inherit until they are 65!

Whether or not some of the money can be used before the child turns 18 also depends on the will. If the will simply says the child inherits at age 18, then that's what happens. No advances would be allowed. It would take a court order to change that, and such orders are not always granted. In the will that sets up the trust, look for a specific clause that allows the trustee to use the funds, and for what purposes. This type of clause should also specifically say whether the capital of the trust can be used, or only the interest earned on it can be used.

Sometimes funds set aside for a child are restricted so that they can only be used (before age of inheritance) for specific things such as education. In most cases though, a will says that the funds can be used for the child's general benefit. Keep in mind though, this is at the discretion of the trustee. You or the child may ask for funds but the trustee can say yes or no.

Hopefully this answers a few questions about trusts for minors. I hope it also points out to the many parents reading this post just how important it is to have a trust for children properly drafted in your will. Simple isn't always better if it leaves out these essential details.

11 comments:

  1. I live in Ontario. My brother left me as executor of his estate and trustee of his life insurance policy funds to be held until his minor children are of legal age. The insurance policy says 18 years of age; the holographic will says 25. Can I resign as trustee – they are both over 18. Thank you.

    ReplyDelete
    Replies
    1. I replied to this question in a new blog post dated October 30, 2015. Here is the link: http://estatelawcanada.blogspot.ca/2015/10/what-if-life-insurance-policy-says-pay.html

      Lynne

      Delete
  2. Anonymous

    My mother was living with a man which he passed away. It's been 2 years he did leave her a trailer in his will,he bought which was written off when he passed. His kids has the permit for the trailer and won't sign it over to her and his daughter is the executive of the will,to put it in her name so my question is does she have to probate the will or from where her name is in the will stating the trailer is hers do they have to sign the permit in her name. The executive of the will is the one that won't sign the permit for the trailor

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  3. My son is 18 and his father passed away when he was 13 and supposedly he has a trust but his aunt and uncle will not release it because he now leaves with me in BC he so frustrated and hurt and just want answer what to do

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    Replies
    1. Are you sure that 18 is the age that triggers the release of the trust? It's not always 18. It can be any age. There could also be other conditions such as schooling. You said "supposedly he has a trust" so I'm guessing you have not been given any paperwork or any real information and you're guessing as to when the money is supposed to be released, or even that there is actually a trust at all.

      If you don't already have a copy of his father's will, get one and read the trust carefully to make sure you fully understand what conditions have to be met before the funds can be released. If those conditions have been met, the executors do not have the right to withhold the money.

      It's usually a good idea to start off by gathering information. Once you are sure of the facts, ask - in writing - for release of the funds. This may or may not bring about the result you want. If not, your son will have to hire a lawyer to force the executors to release the funds.

      Lynne

      Delete
  4. My nephew is the beneficiary of my brother`s pension proceeds and is under the age of majority. I was named as trustee but would like to transfer trusteeship to his mother. Is a letter from me to the pension company enough to transfer the trusteeship or do I need a more legal document?

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  5. My children were named in my uncle's will. The estate is settled and both boys (16 and 18) have money left in trust until they turn 21. I tried to connect with the Executor to ask for information about the trust. i.e. How is the money invested, what kind of interest it's making, balance etc. He won't give me any information. I'm a bit concerned especially since any interest earned could impact tax returns for the boys and me as I still can claim the 16 year old as a dependant. What are my rights as a parent to disclosure? Does my 18 year old have a right to have this information for himself?

    ReplyDelete
    Replies
    1. As a parent, you have no right to disclosure. However, I find it problematic that the trustee wouldn't voluntarily give you some information. Often when executors refuse to give any information, it's because they are hiding something. A general statement, I know, but otherwise there is just no reason for them to refuse.

      The kids DO have a right to disclosure so yes, the older son should probably start asking questions.

      There should be no income tax impact. A trust is its own taxpayer.

      Lynne

      Delete
  6. I live in Ontario. I am single and do not have any children. I do not have a Trust and have no plan to set one up. I will appoint an Executor in my Will but do I need to appoint a Trustee as well?

    ReplyDelete
    Replies
    1. The usual way of doing things in Canada is to appoint one person who is called your executor and trustee. This is because your estate IS a trust. You give it to your executor who then has to pay creditors and pay out beneficiaries. So, yes, technically you need a trustee, but if you made a will and just called the person your executor, you would most likely be okay.

      Lynne

      Delete
  7. My mother named my uncle (her brother), myself and my brother as joint executives to her will. We carried out the duties, albeit with great difficulty due to the belligerence of my brother.
    The last thing that is left to do is to set up a trust for my brother's two minor children. My uncle and I want to have nothing to do with it. We want to resign as trustees (although no trust has been set up yet.) We do not care who my brother nominates to take over from us and we do not care how or where the children's legacy is invested. Many sensible suggestions have been made as to who might take over from us, but my brother refuses to accept all workable solutions proposed.
    What is our legal recourse if we simply do not want to be co trustees? It may be useful to note that I live in a different country from them all and my uncle is 89 years old!

    ReplyDelete

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