Creating Intergenerational Wealth For First Nations: Indigenous Settlement Trusts

For years, First Nations have been negotiating and settling specific claims relating to past wrongs committed against them, including those relating to the Crown’s failure to provide reserve lands or other assets under Treaty, as well as mismanagement of those lands or assets. For more information on specific claims and their process, please see Uncovering past wrongs: Understanding specific claims in Canada.

Many First Nations have recently settled their specific claim relating to the Crown’s failure to provide agricultural benefits or are in the process of negotiating a settlement right now. How can they protect their settlement monies and create intergenerational wealth for their First Nation? One of the ways they can do this is to create a trust.

What are the benefits of a trust?

In addition to protecting their settlement monies, a trust can help grow the real value of those monies for the long-term benefit of the First Nation. A trust can also be a tool to generate a reliable and sustainable source of income for the benefit of the First Nation. For Indigenous settlement trusts, the trust is typically for the benefit of the First Nation as a whole – it is intended to benefit all members, collectively, for generations. The First Nation can then appoint a regulated and insured corporate trustee or community trustees to manage and administer the trust in accordance with the trust agreement.

What is a trust agreement?

A trust agreement sets out the rules for the management, investment, spending and other uses of the settlement monies for the collective benefit of the First Nation. It serves as the First Nation’s rule book for the settlement monies. A trust agreement for an Indigenous settlement trust should also be unique to each community. The rules in the trust agreement should be tailored to the particular First Nation’s needs and circumstances and reflect their priorities and objectives.

While Indigenous settlement trusts protect monies, they can also serve as an investment vehicle to create intergenerational wealth. A trust can also be structured so that the First Nation can access a portion of the monies to execute on its more immediate priorities, such as community development and economic development.

The First Nation will usually receive an annual payment from the trust. These annual payments are often used for programs, services, projects, activities and initiatives for both on and off-reserve members of the type and magnitude provided by a public body performing a function of government.

What are key considerations for a First Nation’s trust?

The structuring of Indigenous settlement trusts engages a mix of governance, legal, tax and policy considerations which require the balancing of competing objectives, including protection of capital and access to capital. It is recommended that First Nations take the time required to develop a trust agreement that is reflective of their particular Nation’s circumstances and needs. Common provisions include:

• The purpose(s) of the trust
• How the settlement monies will be protected
• How the trust must be managed and administered
• How the settlement monies must be invested
• The trustee’s role and responsibilities
• Whether there will be per capita distributions, and if so, the amount and eligibility rules
• Whether there will be annual payments to the First Nation
• Processes for accessing settlement monies for community or economic development or other purposes
• Rules regarding accountability and transparency, including reporting to members

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.