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Saturday, June 15, 2013

Will withholding the Release force an executor to give funds outright instead of in trust?

What can you do if your inheritance is held in a trust and you'd prefer to receive it outright? A reader recently asked me whether withholding the Release would be an effective method of forcing the executor to pay the funds to him outright. His question and my answer are below:

"A will under which I have inherited says that "the share of the estate belonging to beneficiary X shall be held in trust by the executor." I happen to be that "X" and I do not like the idea of my share being held in trust. I am living on disability welfare income, due to a physical and NOT a mental disability. There is no good reason for this to be done to me, but apparently that is what the benefactor wrote in the will. Do I have recourse? Should I refuse to sign the Release until this is cleared up?"

You may never know the full reasoning behind the decision to hold your share in trust, but it's not necessarily the punishment you feel it to be. There are plenty of reasons besides mental disability to hold money in trust. It could well be that the testator thought that by holding the funds in trust, he would be providing you with some advantage, such as ensuring that his bequest didn't interfere with any government benefits you may be receiving. Perhaps he thought his giving you funds over time was the best use of what he had to give you.

Then again, maybe he felt that you're not good with money, or that your spouse isn't good with money, or that you'd gamble it away. Maybe he was hoping to preserve some of the funds in trust for a beneficiary who would inherit after you pass away. Who knows?  As I said, you may never know the reasons if they are not clear from the will.

However, regardless of the reason, setting up the will this way was his choice. Whether or not you are able to change the terms of the inheritance will depend on two things. One is the wording in the will. It should provide instructions about how much discretion over capital may be exercised by the trustee, whether the trust may be wound up or collapsed under certain conditions, and other similar matters.

The other factor that governs recourse is the legislation in your province. The law is surprisingly different from province to province.

Most likely, you're stuck with the trust the way it is.

You'll notice that I did NOT say that the executor has any choice in the matter. The executor is bound by the terms of the will. He doesn't have the legal authority to give you  your inheritance outright if the will tells him to put it into a trust, and insisting that he go against the will is asking him to do the impossible.

This brings me to your question about signing the Release. The purpose of the Release is to give your approval to the work that has been done by the executor to date. The Release doesn't ask you if you like the terms of the will or if you are happy with what the testator left you. It only asks whether the executor has done his job. Therefore, refusing to sign the Release will have no effect whatsoever on whether the terms of your inheritance are changed in your favour.

It's simply not up to the executor, even though he is the one who will hold the funds in trust.

It might be a good idea to take a copy of the will itself to an experienced estate lawyer to talk about what you can expect from this trust, and how it's actually going to work in terms of payments and timing. From there, you can decide whether you can live with it or not, and make a decision about whether you want to take it to court.

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