Bequests to Minors - Hull on Estates #204
This week on Hull on Estates, Nadia Harasymowycz and Paul Trudelle discuss bequests to minors and how a state trustee can deal with any issues that may arise. Paul E. Trudelle Click here for more information on Paul Trudelle.
If you have any comments, email us at hull.lawyers@gmail.com or leave us a comment on our blog.
Nadia M. Harasymowycz Click here for more information on Nadia Harasymowycz.
Nadia Harasymowycz: Hello and welcome to Hull on Estates. You’re listening to episode 204 on Wednesday, March 31st, 2010.
Welcome to Hull on Estates, a series of podcasts for the Canadian legal community dealing with issues and insights surrounding estate planning in Canada. Hosted by the lawyers of Hull & Hull, the podcast will touch on some key considerations when planning estates and wills. Now, here are today’s hosts.
Paul Trudelle: Hi and welcome to another episode of Hull on Estates. I’m Paul Trudelle.
Nadia Harasymowycz: And I’m Nadia Harasymowycz.
Paul Trudelle: How are you today, Nadia?
Nadia Harasymowycz: I’m great Paul. How are you?
Paul Trudelle: Good. Enjoying the warm weather.
Nadia Harasymowycz: Indeed. It’s lovely outside.
Paul Trudelle: Tomorrow is the first day of April and spring is here. Today we thought we’d spend some time talking about dealing with bequests to minors and how an estate trustee can best deal with those and problems that are posed when there is a bequest to a minor or a trust set up for a minor and some of the things that an estate trustee can do in order to deal with those problems.
Nadia Harasymowycz: I think one of the most important things that you have to know in a situation like this if you are an estate trustee is that you can’t simply pay the minor the funds, in most instances.
Paul Trudelle: Yes and even if the Will says that money can be paid to a parent or guardian of the minor as we often see, the fact is that under the Children’s Law Reform Act, you are only able to pay to a parent up to $10,000 and that’s even if the Will provides that the money can be paid to the minor or the parent or guardian, or the trust can be wound up by making an encroachment. And the case that decides that point is the case of Hedley and Grant. It’s a 1998 unreported decision.
So what can an estate trustee do then, when faced with terms of a Will that provide for a gift to a child where the gift is more than $10,000?
Nadia Harasymowycz: Well there are several options available to the estate trustee. The first is that simply maintain the trust and you hold the monies until the minor becomes of age and you can pay the beneficiary outright.
Paul Trudelle: That’s right. And I guess that’s what most Wills would direct, is that the monies are to be held in trust for the minor until they attain a certain age. The trustee is expected to open accounts and set up that trust and treat it as a separate trust. The problem with that, though, is that there are accounting requirements, tax requirements that go along with that. The estate trustee is responsible for the proper investment of those funds and that can lead to difficulties for the trustee, particularly where the trust is a smaller one and it’s going to be going on for some time.
Another option is the payment of the funds into court for the benefit of the minor.
Nadia Harasymowycz: Right and in doing that, what the estate trustee essentially does is takes the money that’s been left to the minor and deposits it with the Accountant of the Superior Court and that means the estate trustee is essentially released from all obligations to deal with those funds.
Paul Trudelle: Right and that application is a formal application that needs to be made to the Accountant with supporting materials that justify the payment into Court but it’s something that’s not too difficult and shouldn’t be too expensive to do and is relatively straightforward. And the trustee, once he or she complies with that application process and pays the money into Court, may be absolved from any further liability with respect to those funds.
Nadia Harasymowycz: We should note in the situation, though, that you do have to notify the Office of the Children’s Lawyer and put them on notice of that fact so that once monies are paid into Court, the parent or guardian wants to request any monies from those funds, they do have a vehicle to do that and that would be through the Office of the Children’s Lawyer.
Paul Trudelle: That’s right. So once the money is in Court, it’s not frozen there. It’s accessible by or on behalf of the minor by the parents if they’re able to satisfy the Children’s Lawyer as to the need for the funds. Once they do that, the Children’s Lawyer is able to obtain a Court order without too much difficulty in order to have the monies paid out of Court to the parent.
Nadia Harasymowycz: So I guess the third option here is to actually appoint a parent as guardian of property and make a distribution to them.
Paul Trudelle: That’s right and I think most people may not realize that the parent is not automatically…is not the guardian for property for the minor and even a parent has to make a formal application to the Court to be appointed as the guardian for property. The application process is under the Children’s Law Reform Act. It’s a formal application to the Court. It would be brought on notice to the Children’s Lawyer. The applicant, usually the parent, would have to satisfy the Court as to the need for guardianship and also with respect to what steps the parent as guardian is going to take in order to protect or invest or safeguard those monies and what use they’re going to make of them. Normally, a guardianship plan is filed with the Court. It’s reviewed and vetted by the Office of the Children’s Lawyer who will raise any issues or concerns that they may have with respect to the guardianship plan.
I guess there’s an issue with respect to the costs of that and there is a cost to bringing that application for guardianship.
Nadia Harasymowycz: It’s important, though, to know that those costs are likely not going to come out of the minor’s share, that they will be attributed to the guardianship application, the person applying for guardianship, and not the minor.
Paul Trudelle: Right and those costs can be prohibitive, particularly if the fund is a rather small one and a better route or easier route might be to have the monies paid into Court or simply held by the estate trustee. However, if the estate trustee doesn’t want to hold the funds and it’s felt that the guardianship application would give the guardian better control over those funds, then the guardianship application is definitely a route that could be taken. The costs, however, as you said, would be something that may be borne by the applicant.
Just to go back to the Hedley and Grant case…Hedley and Byrne is another principle…Hedley and Grant case that says that the estate trustee simply can’t encroach on the trust and pay all of the monies over to a parent. The Hedley and Grant case says that that would be a complete abdication of the responsibilities of the estate trustee. We now see Wills that provide another mechanism that allows for that type of payment to be made. Those Wills, in effect, state that the parent or guardian is in effect a successor trustee and the estate trustee pays the monies to the parent as trust funds and the parent then has to hold them as trust funds for the benefit of the minor. And that may be one way of…or another way of getting the monies out of the Estate and into the hands of the minor or someone on behalf of the minor.
Nadia Harasymowycz: If that’s an option that’s being considered, though, the estate trustee should ensure that they get an acknowledgment from the guardian or the parent to protect themselves from any liability.
Paul Trudelle: That’s right and I think it’s always a good practice, if possible, to get approval of the Children’s Lawyer or at least run your ideas by the Children’s Lawyer to get their input before any distribution or steps are taken.
Okay, well I think that brings us to the end of this podcast with respect to issues arising relating to bequests to minors. We invite you to send us any comments, questions or concerns that you may have.
Nadia Harasymowycz: You can do that at hull.lawyers@gmail.com. You can also visit our blog at estatelaw.hullandhull.com where you’ll find even more information.
Paul Trudelle: And at our website, you can visit our website at www.hullandhull.com. I also want to point out that we do have another Breakfast Series coming up on Wednesday, June 16th, and at this Breakfast Seminar we’re going to discuss the always interesting issue of passing of accounts. So we invite you to attend that and visit our website for information on that or just look at or find our recent Probater which sets out information.
Nadia Harasymowycz: We hope that you enjoyed the show. I’m Nadia Harasymowycz.
Paul Trudelle: And I’m Paul Trudelle. Thank you.
This has been Hull on Estates with the lawyers of Hull & Hull. The podcast you have been listening to has been provided as an information service. It is a summary of current legal issues in estates and estate planning. It is not legal advice and you are reminded to always talk with a legal professional regarding your specific circumstances.
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