League and Williams Lawyers

Tag: trust accounts

  • Varying a Trust: Courts Approving Trust Fund Modifications

    Varying a Trust: Courts Approving Trust Fund Modifications

    In the estate planning process, people commonly use trust accounts to give gifts. They can also create purpose trust accounts, which designate funds for a specific purpose. Some common trust accounts that are made in wills include:

    • Trust accounts made for minors to give them parts of the account at certain intervals or milestones of their life;
    • Purpose trust accounts, where the contents are to be spent for a specific purpose (such as a pet trust account);
    • Trust accounts made for children in a past relationship, where the funds can be used by the testator’s spouse until their death; or,
    • Trust accounts for disabled beneficiaries.

    Purpose Trusts and Estate Planning

    Trusts can have lengthy terms or be in effect for many years before the beneficiary recieves the entire gift. Sometimes the terms of the trust become outdated, preventing the beneficiary from using the trust to its fullest potential. The courts are sometimes able to vary the terms of the trust to create more realistic and useful terms.

    In essence, the terms and overall purpose of a trust can be anything that the testator wishes. This sometimes causes unrealistic conditions in trusts. For example, a person writes in their will, ”$100,000 is to be put in a trust account for my daughter. These funds are to be used to support her future schooling. My daughter will only be entitled to withdraw from this trust account for the purpose of paying overdue library books.” While this trust has a beneficial purpose, it is not realistic that the daughter will require $100,000 to pay overdue books. In this case, the courts could vary the trust for the daughter, adjusting the terms to better reflect the overall intention of the trust and enable the daughter to use the trust to support her education more effectively.

    Trust and Settlement Variation Act

    The Public Guardian and Trustee of BC can file to have a trust modified on a person’s behalf.

    In BC, the Trust and Settlement Variation Act (TSVA) specifies the conditions in which the courts are able to vary a trust. Any interested party is able to come forward before the courts to request a variation. The courts have the discretion to either approve the request and vary the trust, to revoke the trust or enlarge the powers of the trustee. Variations occur most commonly with trusts that the beneficiary cannot reasonably utilize, although the courts have no specific criteria for approving a request.

    Who Can Request a Trust Variation

    The TSVA is intended to benefit people who are incapable of defending their legal and personal interests. It specifies the following people are able to have a trust variation request filed on their behalf:

    1. Any person having, directly or indirectly, an interest, under the trusts who by reason of infancy or other incapacity is incapable of assenting,
    2. Any person, whether ascertained or not, who may become entitled, directly or indirectly, to an interest under the trusts as being at a future date or on the happening of a future event a person of a specified description or a member of a specified class of persons,
    3. Any person unborn, or
    4. Any person in respect of an interest of the person that may arise by reason of a discretionary power given to anyone on the failure or determination of an existing interest that has not failed or determined.

    The TSVA allows people to act on behalf of unborn babies, minors and incapacitated people. The courts allow any person to act on any of the above person’s behalf.

    Varying an Unreasonable Trust Account

    Let’s examine the example above. Assuming the daughter was a minor at the time, her guardian might recognize the bizarreness of the trust terms and request it be varied. One might propose to remove the restriction on spending the funds on overdue books. This way, the trust still honours its intentions (supporting her schooling) and becomes reasonably useful to the beneficiary. The guardian could request a provision that entitles the daughter to the remaining funds after she completes her education.

    In the end, the TSVA is designed to ensure trusts can fully benefit their respective beneficiaries. If you believe a loved one should have their trust inheritance modified to their benefit, contact an experienced estate lawyer today.

    Have a question about this topic or a different legal topic? Contact us for a free consultation. Reach us via phone at 250-888-0002, or via email at info@leaguelaw.com.

  • Constructive Trust: Using Trusts to Remedy Estate Plans

    Constructive Trust: Using Trusts to Remedy Estate Plans

    Trust accounts are a common and useful estate planning tool. Trusts are accounts where a third party holds an asset for the specific use of a beneficiary. Typically, the beneficiary is only able to withdraw funds (or other property) from the trust account at certain time intervals or for a specific purpose. Will-writers use trust accounts to control the distribution and use of their estate assets. People commonly use trusts to hold high-value assets like land. The trustee maintains the trust and its contents. The beneficiary gets the proceeds upon sale of the asset. A constructive trust, which forms differently than a standard trust in estate planning, is another type of trust.

    Constructive Trust

    Regardless of the intent of the settlor (the person creates the trust), the law can impose a constructive trust. Like any other trust, a trustee holds property for the benefit of another person. Essentially, when someone owes another a legal obligation concerning property, the courts usually create a constructive trust. The law requires them to hold the property in trust for this person.Most trusts used in estate planing are express trusts, trusts created by the will-writer intentionally and explicitly.

    Constructive trusts arise through application of the law in order to uphold equitable property interests. In such a trust, the rightful (title) owner keeps the title to the property, even though they have an obligation to share the benefits of the property with a beneficiary. A common example is when a parent disinherits their child. Usually, children are entitled to a portion of their parent’s estate under the Wills, Estates and Succession Act (WESA). The person who ultimately receives, for example, the parent’s home, might have a legal obligation to distribute benefit from the property to the child. In this instance, the court would impose a constructive trust, allowing the child to claim benefit from the property.

    Remedial Constructive Trust

    The courts can also impose a remedial constructive trust. This is similar to a constructive trust, and it provides a remedy to someone who has been wronged. Typically, the date of the wrongdoing is when a remedial constructive takes effect at law. Often times, it is only part of the full remedy the victim receives. Unjust enrichment often leads to the opening of a remedial constructive trust.

    Another common form of remedy for unjust enrichment is quantum meruit (monetary payments).

    The courts order a remedial trust, which is the main difference between a constructive trust and a remedial constructive trust. The law imposes a constructive trust, but the courts do not directly or specifically order its creation to remedy a situation. A constructive trust is created when a person is lawfully entitled to a property, ensuring they receive their rightful benefit from the property. On the other hand, if a person successfully contests an issue before the courts, the courts might open a remedial trust be opened as part of the compensation package.

    Unjust Enrichment and Remedy from the Courts

    In the case of Haigh v. Kent (2013), the claimant argued that the defendant had been unjustly enriched by his (the defendant’s) contributions to the resort he had lived at for over 30 years. After the court considered the test for unjust enrichment, the claimant proved a valid claim for equitable benefit from the property – the defendant had unjustly gained at the claimant’s detriment. Instead of awarding a lump sum of money, the courts determined it was more equitable to give the claimant a portion of the resort.

    Since joint ownership of the property would be unreasonable for the two, the courts opened a remedial constructive trust. The trust awards the claimant 25% of the resort if it sells. This way, the trust rewards the claimant for his services to the resort, but the defendant still retains ownership of the property.

    Establishing Unjust Enrichment

    For those who have fallen victim to unjust enrichment, remedial constructive trusts are often the solution the courts will provide. To quickly summarize, in order to have a successful unjust enrichment claim, you must prove that:

    • There was an enrichment or benefit received by the defendant;
    • The plaintiff suffered a loss related to the enrichment, and;
    • There was no juristic reason for the enrichment.

    After a successful unjust enrichment claim, the courts might order the creation of a remedial constructive trust as part of your remedy. If you feel you’ve been wronged and have a claim for a remedial constructive trust, contact an experienced estate lawyer today. We can help you to receive the assets that are rightfully yours whether that is through a remedial trust or not.

    Have a question about this topic or a different legal topic? Contact us for a free consultation. Reach us via phone at 250-888-0002, or via email at info@leaguelaw.com.

  • Keeping Bequests Out of In-Law’s Hands

    Keeping Bequests Out of In-Law’s Hands

    Parents are often concerned about how their children will use their inheritances. It is common to worry about assets falling outside of the family. This often happens as a result of a child’s divorce after the death of their parents. For concerned parents, a traditional gift in a will can likely to fall short of your estate planning needs. Protecting your child’s inheritance from being split with their ex-spouse presents a challenge for will writers. In this blog, we’ll discuss ways parents can ensure their child keeps their inheritance and uses it appropriately.

    A Traditional Gift to a Child

    The most straightforward way to give a gift in a will is to simply name a beneficiary for an asset. After the will writer passes away, the beneficiary will own the asset, and can do whatever they wish with it. For example, if the asset was a house, they could create joint tenancy ownership with their spouse, sell the home and use the proceeds to pay off their spouse’s debts. The original owner of the home has no assurance that the asset will stay in the family. An outright gift is not the best option for parents who are worried about a child’s inheritance leaving the family.

    Often, parents trust that their child will keep the asset in the family. However, the asset or its value might leave the family even if the child doesn’t intend for it. If the child passes away shortly after their parents, the inheritance would pass through their estate to another beneficiary. The child didn’t do anything against their parents’ wishes, but the outcome was still undesirable from the parent’s perspective. For these reasons, giving an asset outright to a child is usually not a good idea if you wish to ensure that the asset stays in the family.

    Trusts for Assets, Trusts for Funds

    A trustee is appointed to safeguard the assets of a trust for the benefit of the beneficiary, according to the terms of the trust agreement.

    By creating a trust, parents can have much more control over an estate asset and its use. They can create specific terms for how and when the appointed beneficiary will receive the contents of the trust. For example, if a family cabin is held in trust, parents can specify the cabin is to be shared equally by their children. They can even specify time periods in which each child can use the property.

    The parent could also create a purpose trust, where trust funds are only to be used for a specific purpose. For example, the parent could leave $10,000 to their child to be used for university tuition. Parents can create any rules or conditions they wish, and the beneficiary must comply in order to access the funds. The trustee for the account will ensure that these rules are followed while distributing the funds to the beneficiary. Having assets in a trust account will keep them in the family, assuming conditions have been made to ensure this.

    Reminders for Will Writers

    Ultimately, parents are able to ensure their estate and inheritances are kept in their family by using a detailed and tailored estate plan. While many might trust their children to follow their wishes, sometimes it’s out of the beneficiary’s control and inheritances can end up being used in ways you would not wish for, or even imagine. It’s always best to be prepared for any unusual circumstance and trust accounts can be the best method available to do so. By using trust accounts in a will, conditions that ensure assets remain in the family and are used as intended can be created.

    If you require assistance creating your estate plan, contact an experienced BC estate lawyer today. We will ensure your estate is handled exactly as you’re expecting, ensuring that your inheritance is kept in the family under all circumstances.

    Have a question about this topic or a different legal topic? Contact us for a free consultation. Reach us via phone at 250-888-0002, or via email at info@leaguelaw.com.