F O C U S O N US AND CANADA INTER VIVOS TRUSTS

Test your trust K Thomas Grozinger outlines the requirements to create a valid inter vivos trust in Canadian common-law jurisdictions

What requirements must be met to e ectively 1 2014 ONCA 490 beneficiary. If one individual fulfi ls all these roles create an inter vivos trust in Canada? The Ontario (CanLII) without any other person being either a co- Court of Appeal, in White v Gicas,1 held that ‘for 2 At paragraph 37 or potential benefi ciary, there will be no trust.3 a trust to be validly created, it must be properly 3 HAJ Ford and WA Lee, Generally, the terms of a trust will provide for multiple declared and constituted. Declaration of a trust Principles of the Law of benefi ciaries, so this will not be a concern. Also, requires certainty of intention, subject matter, and Trusts, volume 1 (LBC while a may want to retain control over trust objects. Constitution of a trust requires transfer of Information Services, assets by being a trustee, the settlor will want to to the trust property to the trustee’.2 1996), paragraphs 5010 obtain advice to understand the potential tax Note that the reference to a ‘declaration’ here and 5012 consequences of retaining such control (e.g. in does not necessarily refer to the ‘form’ of the trust Canada, attribution of income and taxable capital instrument, but rather to the fact that a settlor agrees gains to the Canadian resident settlor under s75(2) to a particular trust relationship. In some cases, an Income Tax Act). individual who owns assets will ‘declare’ themselves trustee of those assets for others. The document setting CHOICE OF TRUSTEE FOR PERPETUAL TRUSTS out the terms of the trust may be described as a trust In many situations, appointing an independent, ‘declaration’. In other cases, an individual (a settlor) corporate trustee either as sole trustee or co-trustee can will gift or deliver assets to another (a trustee) to hold prove benefi cial. Corporate o er the benefi t of pursuant to certain terms of trust to which the settlor being experienced in trust administration, as well as not and the trustee agree. The document that declares being subject to death or illness, unlike a family member the terms of the trust in these cases is typically given or friend. In those Canadian provinces that no longer the title of ‘trust agreement’, ‘deed’ or ‘settlement’. have the rule against perpetuities, namely Manitoba, These descriptions might be used by some drafters Saskatchewan and Nova Scotia, can create inter interchangeably, regardless of the form of trust. vivos trusts that have the potential to last indefi nitely. Having a corporate trustee will no doubt be a major WHEN PHYSICAL TRANSFER IS NOT REQUIRED consideration when contemplating who to appoint as Whether the trust is in the form of one settled by the a trustee for such perpetual or dynastic trusts. same individual who becomes trustee, or one in which an individual transfers assets to another who becomes the trustee, the substance of the requirements to create a valid trust remains the same – namely, satisfaction of STEP CANADA’S the three certainties and proper constitution. CERTIFICATE IN ESTATE However, where an individual declares themselves AND TRUST ADMINISTRATION trustee of assets that the same person owns, constitution would not generally involve a physical transfer of This certificate is designed to enhance the knowledge and performance of Canadian estate administrators, the assets, as they will remain in the same person’s K THOMAS possession. It will be necessary, though, to confi rm that GROZINGER TEP trust o cers, junior trust o cers, retail bankers, law the trust declaration clearly describes the assets held by IS A PRINCIPAL clerks, junior associates, paralegals, wealth-management TRUST SPECIALIST that individual in the trust relationship. Also, as far as sales representatives, and administrative assistants AT RBC WEALTH working in the area of estates and trusts. The second possible, any re-registrations of title to assets into the MANAGEMENT, ESTATE name of the individual as trustee should be completed. AND TRUST SERVICES, course in the programme deals with advanced topics in PROFESSIONAL estate and trust administration and will teach students PRACTICE GROUP, SETTLOR AS SOLE TRUSTEE AND BENEFICIARY how to determine if a valid trust has been created. ROYAL TRUST Find out more at www.step.ca If the settlor wants to be a trustee of the trust, it is CORPORATION important that they are not the sole trustee and sole OF CANADA

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