Alberta's Trustee Act was recently overhauled and revised. Bill 12, which revised the original act, received Royal Assent on April 29, 2022 and came into force on February 1, 2023 (the "Act" or the "New Act"). The Act attempts to clarify the law and reflect modern trust practice in Alberta. The New Act is based on the Uniform Law Conference of Canada's Uniform Trustee Act.
The previous version of the Trustee Act in force in Alberta did not explicitly address charitable trusts, beyond including charitable purposes and charitable institutions in the definition of "beneficiary." The New Act contains several provisions related to charitable trusts, and also allows for the recognition and creation of non-charitable purpose trusts. These new provisions may have a number of implications for charities and non-profits in Alberta (particularly, those that accept restricted gifts) and their donors.
Changes in law surrounding the variation of charitable purpose trusts
Among other changes relating the charitable purpose trusts, the New Act codifies the common law rule known as the cy-près doctrine, and also provides the courts with some additional powers when it comes to varying charitable purpose trusts.
Cy-près comes from the phrase "cy-près comme possible," which means "as near as possible." Where it has become impossible or impracticable to achieve the original purposes of a charitable purpose trust, (and assuming the trust instrument does not contain a variation clause) the court can rely of the cy-près doctrine to alter the purposes of the trust to purposes that are as near as possible to the original purposes.
The New Act codifies this power of the court — and goes further — providing the court with an additional power to vary the purposes of a charitable purpose trust if such a variation would "...facilitate the carrying out the charitable intent, whether general or specific, of the settlor." This provision in the New Act broadens the court's powers and permits the court to make changes to the purposes of a charitable purpose trust even if the original purpose has not failed.
Another major change that comes with the New Act is that it states that the court's powers to vary a charitable purpose trust prevail over any contrary provisions in the trust instrument; this was not the case under the previous legislation.
Non-charitable purpose trusts
The New Act has provisions specific to non-charitable purpose trusts, which are purpose trusts (i.e. trusts without identifiable beneficiaries) with purposes that fall outside the legal definition of charity.
Many charities enjoy long term endowment funding arising from charitable purpose trusts. However, endowment funding has historically been unavailable to non-profits that don't have charitable status. This is due, in part, to the fact that the range of non-charitable purpose trusts that have been recognized by the common law is very narrow. While the circumstances in which a valid non-charitable purpose trust can be created are still limited, the Act opens up some additional possibilities.
The Act states that the non-charitable purpose must be either:
a. recognized by law as being capable of being a valid object of a trust,
b. for the performance of a function of government in Canada, or
c. a matter specified by regulation.
The fist category pertains to non-charitable purpose trusts that have been recognized by the common law. Maintaining grave sites, and maintaining the care of pets are examples of valid non-charitable purposes capable of creating a trust at common law. Currently, there are no non-charitable purposes specified under regulation in Alberta. As such, the third category provides the most possibility as a source of new non-charitable purpose trusts in Alberta. This category might include trusts for the preservation and maintenance of public parks and buildings, or the support of community-based activities.
It will be interesting to see how the law develops in this area. As more non-charitable purpose trusts are legally recognized, it is likely that the government will create a list of acceptable non-charitable purposes in a regulation.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
