Property of a minor
As Canadian parents and guardians are responsible for the support and education of their children, it may come as a surprise that in most Canadian jurisdictions, parents and guardians are not automatically entitled to control their minor children’s property.
For example, throughout most of Canada, if a child receives an inheritance and there is no will, a court application is necessary to appoint someone to manage the child’s inheritance. If there is no willing or able person, the public trustee (this name varies depending on the province/territory) will typically be charged with managing the property. The rules regarding the use and management of the inheritance are governed by the particular province/territory’s legislation and can sometimes be rather limited. Once the child reaches the age of majority, the property is transferred outright to the child without consideration of the child’s ability to manage the funds on his/her own.
These rules would also apply if a minor receives an inheritance under a will and no person is appointed as trustee of the minor’s inheritance in the will.
In most situations, this is not the desired outcome of the person leaving the property to the minor child. In addition, court procedures and applications can often be time consuming and expensive.
The best way to prevent this result is by preparing a properly drafted will that establishes a trust for the minor beneficiary. Some of the benefits of this strategy include:
• Being able to name the person(s) responsible for the management of the minor’s inheritance.
• Having the flexibility to choose an age for the child to receive the property or to have the trust continue for the longer term, instead of having the property transferred to the child when he/she reaches the age of majority.
• Having the ability to include personalized guidelines with respect to the use of the inheritance.
In most provinces, for inheritances from a life insurance policy or registered plan, the owner of the life insurance policy could designate his or her estate instead of designating the child directly, and then set out the trust terms with respect to the inheritance in his or her will. Alternatively, in some provinces, it may also be possible to designate a trust as the beneficiary of a life insurance policy or registered plan and create the trust in a separate standalone document.
In Quebec, the rules are somewhat different. According to Quebec law, a parent is automatically responsible for the management of a minor child’s property (referred to as a “tutor”). However, if the property has a value over $25,000, a counsel (usually comprised of three family members) must be appointed by the courts to oversee the management of the minor child’s property by the parent. A parent can appoint a tutor (whether by will or other legal document) in the event they are no longer able to act. This situation would also require the appointment of a counsel to oversee the management of the person appointed no matter the value of the minor’s property. If the minor does not have a parent and there was no tutor appointed by the parent, the tutor, as well as the overseeing counsel, must be appointed by the courts.
Since planning for a minor child is complex, you should carefully review your planning with your lawyer and advisor. You should also ensure that your intentions are accurately reflected in your will.