In 2025, Prince Edward Island introduced a sweeping modernization of its trust legislation through Bill No. 5 –Trustee Act, replacing the longstanding Trustee Act (Chapter T-8). This new Act represents a significant expansion of legislated trust law, enhancing fiduciary standards, expanding trustee powers, and providing further protections for beneficiaries. Below, we highlight the key elements of the new legislation and how it diverges from its predecessor.
The new Trustee Act came into force on August 2, 2025, and is more than a cosmetic update. It is a comprehensive restatement of trust law that introduces clarity, structure, and modern fiduciary standards.
- Clear Scope and Modern Definitions
The Act begins with a collection of modern definitions not found in the previous legislation, including terms like "qualified beneficiary," "designated person," and "substitute decision-maker." These clarify the rights and roles of parties involved in a trust and provide legal certainty in the administration of trust property.
Unlike the former Act, the new Act also defines the types of trusts to which it does not apply—such as implied, resulting, and constructive trusts.
- Streamlined Appointment and Removal of Trustees
Part 2 of the new Act establishes detailed procedures for appointing substitute or additional trustees. It introduces the concept of a "designated person" who has the authority to appoint trustees in the event of death, incapacity, or resignation.
The new Act also creates mechanisms for the removal of trustees by majority decision among co-trustees (with more than three) — based on unfitness, conflicts, or failure to administer the trust. These provisions are entirely new, replacing the reliance in the former Act's on court intervention for trustee changes.
- Automatic Vesting of Trust Property
Previously, transferring trust property from one trustee to another required court-issued vesting orders unless set out in a trust indenture. Under s. 21 of the new Act, vesting occurs automatically when a trustee is appointed or removed, simplifying trust administration.
In cases where no trustee remains, the property temporarily vests in the court, maintaining continuity in legal ownership.
- Elevated Fiduciary Standards
The new Act imposes an express duty on trustees to act:
- In good faith;
- In the best interests of the trust's objects; and
- In a way so as to exercise the care, diligence and skill of a prudent person.
It provides specific guidance on conflict of interest and permits trustees to seek court relief in cases where their duties may conflict with personal or external interests. These fiduciary standards mark a significant advancement from the former Act's limited references to trustee duties.
- Mandatory Reporting and Transparency
A major innovation is the requirement in s. 28 for trustees to report annually to all qualified beneficiaries. This includes:
- Asset and liability statements;
- Receipts and disbursements statements; and
- Valuation basis.
Beneficiaries also gain the right to inspect source documents. This transparency requirement did not exist under the former Act unless imposed by a court.
- Enhanced Investment Powers and Clarifications
The new Act retains the prudent investor standard but enhances it by:
- Allowing a total return investment strategy;
- Abolishing outdated common law doctrines;
- Permitting greater discretion in allocating expenses between capital and income; and
- Clarifying that investment decisions should be reviewed as part of a holistic strategy—not in isolation—a notable departure from earlier rules that assessed each investment individually.
- Expanded Judicial Oversight
In the new Act, Courts are given broader authority to appoint trustees (including judicial trustees), vest property, authorize powers not provided under the trust instrument and excuse breaches of fiduciary duty under appropriate circumstances. The new Act also gives the Court expanded authority to vary trusts, which had previously been addressed in the Variation of Trusts Act (now repealed by the new Act). Unlike the current Variation of Trusts Act, the new Act provides for the variation or termination of a trust without court approval if there is unanimous consent of the beneficiaries. This feature should reduce the need for parties to engage in court applications respecting the trust for uncontentious matters.
This represents a more proactive and flexible judicial role than under the former Trustee Act.
- Executor Compensation without Court Approval
The taking of executor compensation was not specifically addressed under the former Act, and was widely considered by Courts under the Probate Act to be an action requiring court approval. Under the new Act, executor compensation is clearly permitted to be taken without court approval, with the consent of beneficiaries (and an associated notice period for a beneficiary to object). The new Act also lists the various factors to be taken into consideration (an expanded version of the common law test).
- Abolishment of the Rule Against Perpetuities
Like other modernizations in other provinces, the new Act abolishes the rule against perpetuities in Prince Edward Island.
Conclusion
Prince Edward Island's new Trustee Act reflects a deliberate and thoughtful modernization of trust law. It not only improves clarity and efficiency but also protects beneficiaries through enhanced transparency and trustee accountability. For legal professionals, fiduciaries, and settlors alike, the Act provides a robust and modern legal framework for the establishment and administration of trusts.
As trust structures continue to evolve with changing family, financial, and tax considerations, PEI's updated legislation ensures it remains current and responsive to the needs of its citizens.
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.
