Estate planning often involves the use of testamentary trusts for purposes such as gifting to minors and gifting to adult dependants with a disability. In some cases, clients request a testamentary trust for adult beneficiaries for other reasons. The use of testamentary trusts is certainly necessary in some situations, but trusts can also have a restricting effect on beneficiaries and cause disputes between family members left behind.

A recent decision of the Court of King's Bench is a good example of the restrictive nature of a testamentary trust and the resulting dispute between surviving family. In Armstrong v Lee Grant, 2023 SKKB 111, the Court was asked to remove a trustee named in the testamentary trust or vesting the trust property in the named beneficiary. The trust at issue was a testamentary trust for the benefit of the deceased's widow, with a gift over to the deceased's minor daughter.

At the time of the Court application, the deceased's widow and the deceased's sister were co-trustees of the trust. The trust terms gave the trustees discretion to pay the income or capital of the trust from time to time to the widow for her benefit. The property in the trust consisted of the proceeds from two life insurance policies, the family home, an income property, and a condominium in British Columbia.

The trust had been ongoing for over 16 years. However, the widow and her co-trustee had disagreements relating to the proper administration of the trust. The widow was "frustrated by her lack of autonomy over how best to manage her financial affairs". The widow had moved on to a new spousal relationship and wanted control over her own finances and the ability to move to a new home.

The Court determined that there were no grounds to remove the deceased's sister as co-trustee of the trust. The bad personal relations between the widow and co-trustee were not sufficient to warrant removal of the deceased's sister as a trustee. There was also no evidence to support that the deceased's sister was failing in her responsibilities as a trustee.

The Court was also not satisfied there were grounds to collapse the trust and vest the property held in trust to the widow. Collapsing the trust and vesting its property into the name of the widow would override the deceased's wishes as set out in the Will.

As a result of the Court's decision, the trust would continue with the widow and the deceased's sister as co-trustees with a discretionary amount being paid for the widow's support and benefit.

It is important to consider the difficulty in changing a trust when making decisions about your estate planning. Clients may feel the need to protect a beneficiary using a testamentary trust. However, the terms of the trust must be carefully considered and drafted to ensure that your wishes for the beneficiary are protected and not unduly restricted.

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.