Trustee For Child Under Will Has Priority

Trustee For Child Under Will Has Priority

Leniuk Estate 2016 BCSC 159 held that a trustee for a child appointed under a will has priority over a guardian appointed under the Family Law act to hold funds in trust for a child’s behalf.

An application to have a guardian appointed trustee who was different from the will appointed trustee Part  8 of the Family Lawact  was dismissed.

The Public Guardians position that the will appointed trustee is paramount and that Part 8 of the Family Law act was upheld by the court.

The will authorized the appointed trustee to make any payments for the beneficiary under 19 to the guardian of such person.

The Court stated inter alia:

Directions of the Court are sought because it is submitted that the executors and trustees are persons “having a duty to deliver property to a child” as defined in s. 175 Infants Act either because there is an existing duty to deliver the property to a child or because they would be under a duty to deliver property to a child if the child were an adult. (ss. 175 (a)(b)).

[12]         That however is not determinative given Part 8 of the FLA does not, in my view, apply in this situation. I say this for a number of reasons.

[13]         Section 176 provides that a guardian, simply because they are a guardian, is not a trustee of a child’s property. As a result someone else can be trustee of the child’s property. Hence, a trust instrument, such as a will, that states a guardian is to receive a child’s property and is empowered to grant a discharge is not contrary to the section. Indeed s. 176 by its very wording recognizes this as it provides “by reason only of being a guardian”. (Emphasis added)

[14]         In my opinion the FLA provisions were not intended to, nor do they, override trust instruments. For public policy reasons, the Legislature saw fit to provide that the FLA address the situation where there is property to which a child is entitled but the child only has a guardian and there is no existing trustee. In circumstances where the property exceeds the prescribed amount in the small property exception the child’s guardian is not deemed to be the child’s trustee simply because they are a guardian. An application to the Court is required in order to determine who the appropriate trustee should be. Section 179 provides the factors the Court should consider when appointing a child’s trustee. Similar to other provisions in the FLA, the best interests of the child are paramount. An example of a situation when this might occur would be if a child received property from a relative who died intestate.

[15]         Given the significant repercussions if the FLA provisions were intended to override existing trusts, in my opinion the legislature would have addressed that explicitly. Since the FLA provisions when dealing with “small property” were clearly addressing issues of proportionality I cannot accept that it was intended that existing trusts would have to apply to appoint a guardian a trustee in order to deliver property to a child. The potential number of applications would undoubtedly be significant and the cost substantial. In addition it would result in an inappropriate layering of trustee on top of trustee. Finally, it would be contrary to the express terms of the trust representing the wishes, in this case, of the testator.

[17]         Part 8 also recognizes in s. 175 that a trust instrument includes a will and that trustees are authorized under such an instrument to receive or hold property in trust for a child. In other words, such a trustee is included in the definition of trustee just as is a trustee appointed under the FLA.

[18]         In addition Part 8 acknowledges a trust instrument’s priority over the provisions of the FLA. For example, s. 178(6) of the FLAdealing with the delivery of small property provides:
178      …

(6)        Nothing in this section
(a)        affects the duty of a trustee to deal with trust property in accordance with the terms of the trust, …

[19]         Section 179, the appointment of a trustee by the Supreme Court provision, also contains an exception in s. 179(1)(b) which provides:

179     (1)        Subject to subsection (2), the Supreme Court on application may appoint one or more persons as trustees over

(b)        all property to which the child is entitled at the time the order is made and to which the child becomes entitled while the order is in effect, except property

(i)         identified in the order, or

(ii)        over which a trustee already has authority. (Emphasis added)

[20]         Finally, s. 179(4) states:
179      …

(4)        Except as provided for in an order made under this section, The Trustee Act applies to the trustee and the trust.

[21]         To assert that children’s property advanced to a guardian by anyone is caught by these sections extends the FLA provisions beyond their purpose and the problem they were intended to address. The purpose of these sections is to ensure that there is a trustee to protect the interests of the child, whether that is the guardian as trustee or another person does not matter. The point is to have someone responsible for the infant’s funds and to address the fact, that often for various practical reasons, it is desirable for the guardians to have the funds. Where there is no trustee and where the property exceeds a certain value, the guardian can be appointed as trustee.

[22]         This is not a situation where there is uncertainty over who is the infant’s trustee. It is the trust instrument (the Will) that establishes the trust and names the trustees. It is the terms of that instrument that govern the trust. As long as the trustees comply with the terms of the trust they are protected. In accepting a receipt from the guardian they would be acting in accordance with the terms of the will and the trust and as a result that would be a valid discharge.

[23]         The trustees are in this instance attempting to delegate their duties as trustees to a third party. In effect they are seeking an order that amounts to a variation of the Will.

[24]         As a result, where the trust instrument addresses the issue of advancing funds, whether income or capital, to a guardian and addresses the obtaining of a valid receipt there is no need for a court application.

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