A Manitoba Court of Queen's Bench decision highlights to
importance of planning for all contingencies when setting up a
The case of Shinewald v. Putter et al, 2014 MBQB 254
(CanLII) was an application under s. 59 of The Trustee
Act, C.C.S.M. c. T160 to vary the terms of a family trust to
add an income beneficiary. The main point at issue was whether the
variation could be made retroactive. Canada Revenue Agency opposed
this request and the court agreed with their position.
Sophie Shinewald had set up the family trust to hold shares of
her son Ed's corporation. Ed, his wife Sharon and their
children were all capital beneficiaries of the trust. Sharon and
the children were income beneficiaries of the trust but Ed was not.
The intention of the settlor was the Ed would benefit from the
income distributions made to Sharon.
Sharon died in 2009. The trust began to distribute income
directly to Ed in 2008 even though he was not an income
beneficiary. In 2013 Sophie brought an application to court to vary
the terms of the trust to add Ed as an income beneficiary.
Mr. Justice Dewar agreed that the variation was justified. All
of Ed and Sharon's children were adults and consented to the
variation. The variation was justifiable under Subsection 59(7) of
The Trustee Act as it was consistent with the intention of
settlor to provide benefits to Ed and his family.
The applicants had requested that the variation be made
retroactive to the date of Sharon's death. This requested was
opposed by Canada Revenue Agency. The issue here was that if the
variation was not made retroactive, payments made from the trust to
Ed between 2009 and the date of the variation would be subject to
additional tax liability as unauthorized distributions from a
The court refused to make the order retroactive. The trust was
set up as part of a tax planning scheme and in tax planning the
form of the documents is critical. There was no evidence that the
failure to make Ed an income beneficiary when the trust was first
set up was a clerical error. The trust was set up by experienced
tax professionals. The exclusion of Ed as an income beneficiary was
part of the original plan. Taxpayers are entitled to arrange their
affairs to attract the least amount of tax but they are bound by
what they have done. They are not entitled to rearrange their
affairs retroactively to obtain some further tax advantage if
things do not work out as planned.
The variation of the trust was approved effective as of the date
of the filing of the application in 2013.
When setting up an estate plan, it is important to take into
account different possibilities. In this case the trust was set up
based on the assumption that Sharon would outlive Ed. There was
nothing in the original trust that allowed for the possibility that
Ed would outlive Sharon. The family therefore had to go to court to
seek approval for a trust variation.
A trust cannot be varied without approval of the court even if
all beneficiaries consent. In this case, the family was fortunate
that all of the beneficiaries were adults and did give their
consent to the variation. If there had been minor children
involved, or some of the parties did not agree to the variation,
the case would have been much more difficult.
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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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.
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.
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