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Wednesday, January 20, 2010

Who can a trustee support with an assisted adult's money?

If you have been appointed as a trustee for an adult, you probably know that you are supposed to use that adult's money in his best interest, and not spend it on other people. The exception is that you can - in fact you should - use his or her money to support his/her dependants, just as that person would have to do if handling his/her own money.

It seems like a simple rule, but real lives often seem too complicated for a simple rule to apply. Sometimes questions areise about exactly who is supposed to be supported by the assisted adult's money.

As a general rule, a person's dependants are his or her spouse, minor children, and children who are over the age of majority but cannot earn a living due to a mental or physical handicap. The trustee should continue to use the assisted adult's money to support these individuals.

Peole who do not fall within this definition of dependants are not automatically entitled to any financial benefit from the assisted adult, but may, in some circumstances, be permitted to benefit.

Note that the word spouse does not just apply to legally married spouses. Common law spouses are equally entitled to financial support. It's not always easy to tell whether an assisted adult's romantic partner is actually a common-law spouse. In a situation where the assisted adult is in a long-term, live-in relationship or has had a child with the partner, it is relatively easy to determine whether that partner is the legal equivalent of a spouse. It can be trickier where relationships are of shorter duration.

There is no magic number of months or years that automatically qualifies a person to be considered a spouse for all purposes in all parts of Canada. For example, you might fnd that a person qualifies as a spouse under a pension plan within a month but must live with the assisted adult for a year to become a spouse for Canada Revenue Agency's purposes.

If you can't determine whether a particular person in the assisted adult's life is a spouse and you are worried about the consequences of allowing this person to receive a financial benefit, you must take steps to clarify the situation. You can consult a lawyer who deals with family law. Alternatively, you can ask a judge for the court's guidance on the question.

Girlfriends and boyfriends who are not living with the assisted adult are generally not entitled to any financial benefit from the assisted adult's property.

Sometimes the situation is more complicated. There could be another person in the picture who is neither a spouse nor a child and would not normally be considered a dependant, such as the assisted adult's parent or sibling. In some cases, that person is living with the assisted adult or being fully or partially supported by him/her due that person's age, infirmity or illness. In such case, discontinuing the financial support could be disastrous for that individual. However, your job as trustee is to act only on behalf of the assisted adult and doing otherwise could cause you to violate your duty as a fiduciary.

This can be a truly uncomfortable position for the trustee. If you, as trustee, believe that the financial support to this person should continue, you should ask the court for permission for it to continue. For example, if the assisted adult's sister lives with him/her and is fully dependent on him/her because the sister has multiple sclerosis and cannot earn a living, it may be the case that the assisted adult feels a moral obligation to support the sister.

In this case, you should present the full facts of the situation (e.g. name, relationship, age, medical condition, the financial impact of the support) to the court. This can be done at the time you are appointed as trustee, or at a review or passing of accounts. You would ask the court whether it is alright for you to carry on with the existing arrangements.

This topic is covered in much more detail in my book, "Protect Your Elderly Parents".

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