Over the past few years, Canadian courts have started taking
note of the existence of trust protectors. Despite comments from a
certain Saskatchewan judge in 2009 ("As indicated, the term
"trust protector" is foreign to me..."1),
recognition of trust protectors as a legitimate party to a trust
may be on the horizon in Canadian trust law.
The traditional trust involves three parties: the settlor, the
beneficiary, and the trustee. One of the major drawbacks of a trust
is that the settlor is required to give up control over the
property. Although trusts can be structured in a manner that might
allow a property owner to retain some of that control, property
owners who exert control over their property after it is settled in
a trust risk certain tax liabilities or a finding in court that the
trust is a sham. Another method for retaining some control is to
use a trust protector.
A protector is a fourth party to the trust.2 Andrew
Holden, author of Trust Protectors (Bristol, UK: Jordan
Publishing Ltd., 2011), offers the following definition of
'Protector' means a person
occupying an office created by a trust instrument distinct from
that of trustee, whether or not referred to as protector, upon
which has been conferred power(s) or right(s) enabling the
office-holder to participate in the administration of the trust or
the disposition of trust assets.
Notably, the protector's role may be written into the trust
instrument free of the fiduciary duties placed upon trustees.
Protectors may be granted powers of genuine discretion (a power to
act with no mechanism for compelling action), or they may be
granted passive powers, such as the power to obtain information
from the trustee. These examples are not exhaustive of the nature
and extent of a protector's involvement.
Holden notes that the office of protector is frequently written
into offshore trusts, and has even received legislative recognition
in certain jurisdictions.3 In Canada, however,
incorporating a protector into a trust presents a number of
challenges. Domestically, protectors remain a lesser used
tool in trust planning, though the concept is not completely
foreign.4 As a creature of practice, rather than of
statute, protectors are variously referred to as
"guardian", "advisor", "specified
person", or "manager".5 These two factors
combined make a survey of Canadian law for judicial reactions to
protectors difficult business.
Despite these challenges, references to "trust
protectors" have begun to appear in Canadian
jurisprudence,6 though there is as yet no significant
judicial discussion of the use and validity of protectors for
Canadian based trusts.
It is not uncommon for parents to provide monetary gifts to their adult children. Parents may wish to help their child with a down payment on a property, or help pay out their child's existing mortgage.
On March 31, 2014, BC's new Wills, Estates and Succession Act1 ("WESA") will come into force. WESA introduces new protections for beneficiaries of estates that are in danger of being disputed or deemed ineffective by a court.
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