On March 29, 2022, the Alberta government introduced Bill 12, the Trustee Act, which the province has described as legislation to make it “more efficient to create and manage trusts while reducing the need to go to court”.
The Act received Royal Assent on April 29 and will come into force upon proclamation.
These legislative changes may make trusts a more interesting option for people of all income levels to manage their assets.
What is a Trust and How is it Used?
Trusts are commonly used in estate planning as a means of organizing and holding assets and distributing them to beneficiaries. Trusts can be set up and operating during a person’s lifetime – these are known as living trusts or inter vivos trusts, and are typically used to control distribution of assets to family members.
When a person dies, a different type of trust – a testamentary trust – is created either by the terms of the will, or by court order, and contains the assets that form part of the deceased person’s estate, which will need to be managed and distributed by the executor.
There are a number of reasons why someone might consider setting up a trust. Trusts can offer a number of benefits, like income splitting, reduced inheritance and capital gains taxes, avoiding probate of certain assets, and protection of assets from lawsuits and creditors. They can also be an effective way of providing ongoing, managed financial assistance to children and grandchildren, without directly transferring assets to them immediately.
What Will the New Act Do?
The new Trustee Act arises from recommendations that were made by the Alberta Law Reform Institute (“ALRI”) following consultation with estate lawyers across the province. The ALRI’s final report noted that “the current Trustee Act is outdated and has not kept pace with the modern world.”
Although several amendments have been made to the current Trustee Act over the years, at its core, it remains an Act based on an English statute dating from 1893, and many of its provisions still reflected that original statute. In addition, it includes rules that many view as archaic, inefficient, or simply no longer needed in modern trust legislation. These include sections providing rules for conveyances of property by married women (s. 20), and powers of trustees of grain-growing property (s. 31).
One of the government’s objectives with the new Act was to make trusts more efficient. Accordingly, the government indicates that the new Act is designed to do the following:
- reduce administrative burdens in operating the trust;
- lessen the need for court involvement by specifying processes so that trustees and beneficiaries do not need court applications for most matters;
- discourage trusts with lengthy terms, while making sure people can still set their own terms;
- clarify trustees’ duties and their accountability to improve protection for beneficiaries;
- decrease the number of matters going to court, resulting in lower legal fees to operate a trust.
The government also indicates that the new Act includes provisions intended to facilitate better and more transparent management of trusts, including better definition of the trustee’s powers and duties. This should benefit both trustees, who can carry out their roles more certainty and effectiveness, and beneficiaries, who will have greater visibility into trust activities.
What else does the New Trustee Act include?
Among other things, the new Act includes the following:
- a new duty of care provision that expressly requires trustees to exercise the care, diligence, and skill of a prudent person in managing the affairs of the trust. This provides increased consumer protection consistent with similar provisions in the Estate Administration Act for a personal representative administering an estate.
- a duty for the trustee to report to beneficiaries and to be responsive to beneficiary requests, providing transparency and supporting proper administration of the trust;
- a provision allowing for a temporary trustee when a trustee is temporarily absent or incapacitated;
- provisions allowing for the removal of an unfit trustee and adding a process for a trustee to resign’
- a provision allowing trustees to perform their duties and powers by majority decision.
As a result of this new legislation, the use of trusts may become an even more interesting option for Albertans looking for efficient, tax-friendly ways of managing their assets.
To find out whether creation of a trust might be suitable for your goals, contact a Vest estate lawyer for a consultation.
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WILLS and ESTATES LAWYER
Colin is an estate lawyer practicing in the areas of Estate Litigation and Disputes. He places high emphasis on developing trusted relationships with his clients, ensuring they feel comfortable and at ease sharing the subtleties of their circumstances.