Using a trust in your will? Be sure to select appropriate trustees

May 21, 2019
Financial advisor meeting with clients

If your will planning involves a testamentary trust for one or more of your beneficiaries, you will need to select appropriate trustees.

The trustees fulfil many important duties, as they are responsible for all aspects of the management and administration of the trust, including:

  • Making all decisions regarding payments of income and capital to the beneficiaries of the trust, taking into account any directions or guidelines you include in your will
     
  • Investing the trust assets
     
  • Maintaining detailed records
     
  • Filing annual tax returns.

In provinces other than Quebec, if you do not specifically appoint trustees in your will, the executors (or alternate executors) you appoint to administer your estate would then also be the trustees, which may not be the most appropriate or desired outcome.

Choosing a trustee

When considering possible trustees (including alternates), you should keep in mind numerous factors, such as:

  • The knowledge and skills needed – In addition to the trustees needing to be capable of dealing with record-keeping and the tax and legal matters that would be involved, consider, for example, whether special expertise might be required to manage particular assets or deal with particular situations, such as a beneficiary with special needs.
     
  • The personal circumstances of the beneficiary and your specific objectives for each trust – For example, if the beneficiary is a minor, or if you wish to protect the assets in the trust due to concerns about the ability of the beneficiary to properly manage an inheritance or possible family law claims or creditor issues against the beneficiary, you should appoint trustees who would make appropriate decisions with these considerations in mind.
     
  • Willingness and availability to act
     
  • The ability to be impartial in dealing with the beneficiaries
     
  • Integrity and the ability to make sound decisions
     
  • Relationship with the beneficiary
     
  • The potential trustee fees that may be charged.

When choosing trustees, it is also important to ensure that a majority of the trustees who control the management and administration of the trust are residents of Canada, so that the trust itself will be considered resident in Canada for tax purposes. Otherwise, complex tax issues could arise.

Note also that in Quebec, there must be at least one trustee who is not a beneficiary of the trust.

Choosing a professional trustee

If you are unable to find anyone appropriate or if you want a completely independent or objective trustee, you could consider appointing a professional trustee, such as a trust company, to act as trustee, either alone or together with other individuals as a co-trustee.

Like an individual trustee, trust companies are responsible for carrying out the normal duties of a trustee and are legally accountable to the beneficiaries. A trust company can also provide experience or expertise that a non-professional trustee may not have, such as where the trust involves a beneficiary with special needs, complex assets or challenging family dynamics. If you are considering using a professional trustee, you should first consult with the trust company to ensure they are willing to accept the appointment and discuss matters such as the services provided, fees charged and whether specific terms need to be included in your will.

Talk to your legal advisors to ensure appropriate trustees are appointed for any testamentary trusts you are using in your will to provide for your beneficiaries.

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