Variation of Trusts – Hull on Estates Podcast #127
Listen to Variation of Trusts
Craig Vander Zee and Bianca La Neve discuss variation of trusts, with an emphasis on the Variation of Trusts Act and approval of variations of trusts on behalf of minor, unascertained, unborn or contingent beneficiaries. The well-known case of R. v. Irving (1975), 11. O.R. (2d) 42 (H.C.) is discussed.
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Variation of Trusts – Hull on Estates Podcast #127
Posted on September 9th, 2008 by Hull & Hull LLP
Bianca La Neve: Hello and welcome to Hull on Estates. You’re listening to Episode #127 on Tuesday, September 9th, 2008.
Welcome to Hull on Estates, a series of podcasts for the Canadian legal community dealing with issues and insights surrounding estate planning in Canada. Hosted by the lawyers of Hull & Hull, the podcast will touch on some key considerations when planning estates and wills. Now, here are today’s hosts.
Craig Vander Zee: Good morning, Bianca, how are you?
Bianca La Neve: Good, how are you, Craig?
Craig Vander Zee: Very well, thank you. It’s nice to have you back here full-time back in the office after being away with your little guy.
Bianca La Neve: Thank you.
Craig Vander Zee: And it’s a pleasure to be podcasting with you today.
Bianca La Neve: It is, it is a pleasure. How was your long weekend?
Craig Vander Zee: Pretty much filled with championship baseball and soccer. The baseball was Saturday, so six hours on the diamond on Saturday for my little guy, and my little girl played in the rain for three separate games on the Sunday. But they had a blast and it was a good weekend.
Bianca La Neve: Great. So, today Craig, I thought we’d talk about variation of trusts. So in starting our discussion of variation of trusts, I think, Craig, the first step is always to look at your trust document. It’s really important to go back to basics, take a look at what the trust document says, its wording, and from there decide on what your next steps are. And those can be?
Craig Vander Zee: Well, I mean, first of all just piggybacking on that, you need to look at, it could be a testamentary trust arising out of a Will, it could be by way of settlement, it could be by other disposition. So you need to understand the trust document and the exact wording of the document. It may be that what you really need is an interpretation of a section in the trust, or opinion, advice and direction of the court. But if those have been considered and it’s truly a variation of the trust, then when you’re considering how you want to go about it, you look towards the Variation of Trusts Act. And when I say how you’re going to go about it, it could be that the variation arises just due to a single issue in the trust; it could be tax reasons or the trust doesn’t provide in a manner that it should, it doesn’t allow for an encroachment and everyone believes in the situation that an encroachment is absolutely appropriate and proper and consented by everyone. But it could also arise from Minutes of Settlement dealing from another procedure, such as a passing of accounts which was contested and as a result, that involves a trust, and as a result the settlement may contemplate a variation of the trust. Obviously, that would have to be done pursuant to the Act and in consideration of the case law criteria.
Bianca La Neve: So it’s important to know that a variation of trust can be a stand-alone procedure, or proceeding, or it can be ancillary to some broader relief sought, like you had, your passing of accounts or approval of a settlement.
Craig Vander Zee: And that’s right, and even if it is piggybacking if you will, on another settlement or another proceeding, you still would bring the application itself. You still do need to bring the application under the Variation of Trusts Act. And the size of the Act or the length of the Act is quite surprising, it’s only one section in length and we shouldn’t let the length of it fool you, because we simply can’t ignore it.
Bianca La Neve: So essentially the Act permits the Court to approve a variation of a trust, whether it be under a Will, a settlement or other disposition, and allows the Court to approve it on behalf of minor, unascertained, unborn or contingent beneficiaries if the variation in the words of the Act appears to be for the benefit of those persons.
Craig Vander Zee: Well in relying on the Act for the jurisdiction to go ahead with it, there are many things to consider in pursuing the variation such as the procedure to follow and the criteria to be met for the variation to be allowed by the Court.
Bianca La Neve: Now, Craig, there is that well-known case, R. v. Irving which sets out essentially the three criteria that a Court considers in determining whether to approve the variation.
Craig Vander Zee: Yeah, and those are in summary, does the variation keep alive the basic intention of the testator or the settler? Does the variation benefit those for whom the Court is asked to consent? And then whether, and this is sort of the legal jargon, but whether a prudent adult motivated by intelligent self-interest and sustained consideration of the expectancies and risks of the variation, would likely accept it. So you first consider, who does the variation need to be done on the behalf of and then you look to those criteria. And for the purposes of today, Bianca, we won’t be getting into the case law that have considered those criteria, because there’s certainly debate as to the importance of each of those specific criteria and how they would apply to different situations, that is, different factual situations. So we’ll leave that for a different day. But what I thought we could focus on today, for the remainder of our session is, looking at the representation of the incapacitated beneficiaries and then touching upon briefly, the procedure.
So essentially then, with minors, the Children’s Lawyer in a trust scenario where the minor as a respondent is going to be the representative and we’ll act as the litigation guardian for the purposes of the variation of the trust. And then we can also look at unborn and unascertained beneficiaries as well.
Bianca La Neve: And Rule 10.01(1) authorizes the Court to appoint a person to represent these interests. This is also known as a representation order. Now although Rule 10 doesn’t specifically refer to the Children’s Lawyer, Courts have traditionally appointed the Children’s Lawyer to represent this class of beneficiaries.
Craig Vander Zee: And again, when dealing with the Notice of Application that’s necessary for a variation, the Notice of Application should specifically request such a representation order in this particular circumstance. And it may very well be that the order is sought for the Children’s Lawyer to represent all minor, unborn and unascertained beneficiaries to cover the global category of those beneficiaries.
And then I guess lastly, Bianca, we should touch upon those beneficiaries that are mentally incapable persons or absentees.
Bianca La Neve: In the case of a mentally incapable person or absentee, where there is already a person that has the authority to act as their litigation guardian, attorney or committee, such person usually acts as their litigation guardian in these variation of trust applications, unless the Court orders otherwise. If there is no person that has the legal authority to protect the interests of the mentally incapable person or the absentee, and there is no suitable person willing to act, then the order that should be sought is appointing the Public Guardian and Trustee.
Craig Vander Zee: Well and that’s right. And I think, given the amount of time, if we’ve dealt with the representation aspect, obviously those who don’t fall into those categories, beneficiaries who are adults and who are capable, certainly ought to seek independent legal advice as well. But they are capable of obtaining that representation and what we were really touching upon were those who the Court and in law don’t see as being capable and as such, need these types of representation orders or types of representation. And so I think given the balance of the time, we’ll just touch upon the documents that would be required for a variation.
Bianca La Neve: So the first document you need is the Notice of Application. The Application is brought in the Ontario Court General Division so in your Notice of Application the relief you are seeking is approval of the variation on behalf of the incapacitated beneficiaries.
Craig Vander Zee: And when you’re dealing with the beneficiaries, that’s whether they’re vested or contingent beneficiaries. And while the Notice of Application is certainly the first document in the Application record, perhaps the most important document in the Application record is the deed of arrangement itself. And the deed of arrangement will set out what the terms of the variation are intended to be. And that is well, that is being requested to be approved by the Court and is to be executed by all of those beneficiaries that have capacity. So it may also be the case that the trustees sign the deed of arrangement as well. And aside from the deed of arrangement, there would be an Affidavit that will set out what is often in the recitals of the deed of arrangement in terms of the facts in putting that before the Court so the Court can understand the situation of how it arises, and that it is in the best interests of those who the Court is asking to approve it on behalf of. And then there’s a Factum and it may very well be that a Factum isn’t necessary, that leave can be sought, that the Factum not be necessary. And that is typical in situations where there is Minutes of Settlement arising from a proceeding and the variation is part of that proceeding, albeit an application unto itself, but that it’s clear to the Court how this variation arises.
And then obviously there’s a draft judgment that would be circulated amongst the parties so that everybody is on notice as to what the terms of the judgment are going to be. And I think that does it for us today, Bianca.
Bianca La Neve: So thank you for listening to our discussion on variation of trusts. As always, we look forward to hearing from our listeners. You may send us an e-mail at firstname.lastname@example.org or leave us a message on our comment line, area code 206-350-6636 and be sure to visit our blog post daily at estatelaw.hullandhull.com.
Craig Vander Zee: Thanks very much, Bianca and I look forward to the next opportunity to podcast with you.
Bianca La Neve: Thanks, Craig.
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