Trusts and Trustees

Introduction to Trusts

• A trust is an equitable obligation that binds a person (trustee) to deal with property owned by them (trust property) for the benefit of others (beneficiaries).
• Trusts are creatures of equity.

Trustee's Responsibilities

• A trustee is required to safeguard the trust property and deal with it in accordance with the terms of the trust instrument.
• The trustee may be required to invest the trust property or convert it to rental property to generate income.

Ownership of Trust Property

• Beneficiaries are primarily liable for payment of income tax on trust investments (Baker v Archer-Shee).
• Trustees are the legal owners of trust property and can impose distress for rent arrears (Schalit v JN Ltd).
• The beneficial ownership of trust property is in the beneficiaries, with the trustee acting as a conduit pipe to convey the trust income (Comm.of Income Tax v Bank of Nova Scotia Trust Co.Ltd).

Purposes of Trusts

• Trusts can be used for succession purposes, to roll over the destination of family property on death.
• Trusts can protect family property from spendthrifts through "protective trusts" or "asset protection" trusts.
• Trusts can facilitate investments through unit trusts, which are pooled investments schemes that pass profits back to individual investors.
• Trusts can benefit charitable institutions, such as schools, universities, and hospitals.
• Trusts can be used for non-charitable purposes, such as to upkeep the testator's tomb.

Nature of Trust and Trusteeship

• A trustee is the person with the legal title of the trust property.
• A beneficiary is the person who benefits from the trust or has a beneficial interest in the trust.
• A settlor is the creator of the trust.
• The office of trustee is onerous.
• The trustee-beneficiary relationship is a fiduciary relationship.

Trustee's Duties

• A trustee must act in the best interest of the trust.
• A trustee must act in accordance with the terms of the trust.
• A trustee must exercise probity (moral, honest, and decent behavior).
• A trustee must not enrich themselves from the trust.
• A trustee must avoid conflicts of interest between their personal interests and those of the trust.
• A trustee must have the legal capacity to act as a trustee.
• A trustee must forego opportunities that come to them in the office of trustee that would otherwise not be available to them (Boardman v Phipps).

Who May Act as Trustees

• Minors and mentally disturbed persons cannot hold property and therefore cannot act as trustees.
• The Crown may act as a trustee where it deliberately chooses to do so, but this is rare (Civilian War Claimants v R).

Types of Trustees

• A trustee can be a corporation.
• A trustee can be an individual.