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.

Are "in trust for" bank accounts really trusts?

Many parents and grandparents set up accounts at a bank to save money for their child or grandchild. They set up the accounts as being "in trust for" (or, ITF) the child or grandchild. These accounts are popular, largely because the set-up is so simple. The idea is that the parent or grandparent puts money in the account, which grows until the child or grandchild reaches the age of majority and receives the funds.

But are these accounts really trusts? And if they are, what does that mean for the parent or grandparent who contributes the money? And what does it mean for the child?

Yes, these accounts are trusts. They may not seem like it, given that there is no deed, will or other document drawn up by a lawyer. Because of this, ITF accounts are known as informal trusts, but they are still trusts.

The basic nature of a trust is that money is held by a trustee (in this case the parent or grandparent) on behalf of a beneficiary (in this case a child or grandchild). Because it's a trust, the money can only be used for the beneficiary. The trustee has a legal obligation to do this. The trust is irrevocable, meaning that the contributing parent or grandparent can't change his or her mind after the account is set up and take the money back out for their own use.

If the child named as the beneficiary reaches the age of majority, he or she will receive the full amount of the funds and any interest earned on the funds. If the child doesn't reach the age of majority, the funds in the ITF account do NOT automatically go back to the parent or grandparent. The funds fall into the child's estate. Odds are good that the child won't have a will, since he or she is under the age of majority. In that case, the funds would be distributed according to the law of intestacy in the province where the child or grandchild lives.

As an example, Ian's grandmother sets up an ITF account for Ian to receive when he turns 18 years old. Unfortunately Ian is killed in an accident when he is 16 years old. He doesn't have a will. The ITF account becomes part of Ian's estate, which according to the law of intestacy goes to his parents. The parents receive the ITF funds.

Make sure you mention any ITF accounts you've set up for your children or grandchildren when  you meet with your estate-planning lawyer.

Four reasons so many parents leave young children unprotected by their wills

Attached is a link to an excellent article found at http://www.pollexestateplanning.com/ that delves into the reasons that so many otherwise responsible parents fail to name a guardian for their young children in the event of the parents' death. I've met many couples over the years who tell me they haven't yet made wills because of the issues surrounding guardianship of the kids, so this article really rang true for me. Click here to read it.

What happens to my child's inheritance if he or she dies before me?

I was asked this question at last week's seminar, and in fact I hear this question regularly. The real or underlying question is whether the child's inheritance will go to the child's spouse. Very few parents want a deceased child's inheritance to go to that child's spouse.

The answer is simple. What happens to the inheritance is what the parent says in the will. If a parent is concerned about the issue, then he or she had better put together a will that addresses it.

The arrangement favoured most often is that a deceased child's inheritance is split equally among his or her children, with the share of any minors being held in trust to a pre-determined age. For example, if William makes a will leaving his estate to his sons Tom and Joe, but Tom dies before his father does, William's will directs what happens with Tom's share. If William likes the most common arrangement, his will will say that Tom's share is to be divided among Tom's children.

From there, a parent such as William needs to clarify a few points. For example, does he want Tom's step-children to be included? What about the illegitimate child that Tom had in high school and currently has only a superficial relationship with?

William may leave some of Tom's share to Tom's wife if he wants to, though as mentioned above, this is fairly unusual. William must consider whether Tom's wife still gets a share if she and Tom were separated at the time Tom died. William also needs to think about whether Tom's wife should be the trustee of the money held in trust for Tom's children, and if not, who would be a good choice for that job.

Some parents choose that if one of their children has passed away before them, grandchildren don't get anything, nor does the spouse of the deceased child. The share of the estate would be given to the parent's other children. Using the family already described in this post as an example, Tom's share would be given to Joe instead. There could also be an arrangement whereby half (or some other portion) is given to Joe with the rest being given to Tom's children.

Another alternative is that a deceased child's share could be given to a charity.

All jurisdictions have laws in place that describe what will happen if a parent dies leaving a share to a child who has already passed away. These laws kick in if the person hasn't left a valid will. There is no guarantee that the legislated arrangement will be the same as what the parent would have chosen.  If the issue is important to the parent, he or she needs to make a will.

Who will look after the kids?

Have you chosen the person or people who will be guardians of your minor children if you and your spouse both pass away? For most people, it's not an easy decision. Click here to read an article about some of the reasons deciding on a guardian can be so tough.

Can a minor inherit money or property?

The general answer is "no". A person must be of the age of majority (either 18 or 19, depending on where in Canada you live) to receive an inheritance.

So what happens to the money or property if it's left to someone who is a minor? It's held in trust for the minor until he or she reaches the age of majority.

This is a situation in which the existence of a strong Will is essential. The Will can control at what age the child inherits the money, who holds it for them in the meantime, and whether any of it can be used for the child before he or she comes of age. Most parents I've spoken to over the years say they'd like to put some controls on the inheritance for children to make sure that the children aren't taken advantage of by anyone, and to help the child maximize the benefit of the inheritance. They can achieve that using their Wills.

If there is no Will in place and a minor is a beneficiary of the person's estate, the money will most likely be held for the child by the Office of the Public Trustee. The full amount of the inheritance (plus interest of course) will be paid to the child on his or her 18th (or 19th) birthday.

In a Will, the terms of the trust are decided by the testator, allowing parents to choose an age later than 18 or 19 if that seems appropriate, and to choose who will look after the money. The parent can also direct that funds from the trust be used to pay for education, medical expenses or general living expenses.

Personal or household items that are left to a child are usually held by the executor/trustee of the Will. Depending on the item, the trustee might decide that the child can have or use the item before reaching the age of majority, if that would be of benefit to the child. For example, you might not want to give valuable jewelry to a 10-year-old, but you might be ok with putting up the framed photos the child inherited.

A minor's name cannot be added to the title of real estate. Again, that has to be held in trust either by the executor/trustee or another person specifically named in the Will.

Can a minor make a valid Will?

The general rule is that a person has to be an adult to make a Will. However, one of my favourite general rules is that general rules have exceptions (we won't debate the logic of that last sentence!). A minor may legally make a valid Will if:

• he or she is a member of the Canadian Forces and is on active service;


• he or she is a mariner or seaman on active service;


• he or she is a member of any other naval, land or air force on active service;


• he or she is married;


• he or she has an adult interdependent partner (Alberta only);


• he or she is in a common law relationship; or


• he or she has children.

A person in the Forces should obtain a certificate or other proof that he or she was actively serving at the time the Will was made. To make sure it stays with the Will, simply staple them together.

Where a person is a minor, is not married or in a common law relationship and has children, he or she can make a Will only to the extent that he or she is making a bequest to the children or to the benefit of the children.

As with people over the age of majority, a minor who makes a Will must have the mental capability to make a Will.