Beneficiaries of a Trust who have a vested interest in the capital can sometimes assign their entitlement to another. But to protect the Trustee, it is critical that any such assignment be properly documented.
Section 11 of the Ontario Statute of Frauds states: “all grants and assignments of a trust or confidence shall be in writing signed by the party granting or assigning the same, or by his or her last Will or devise, or else are void and of no effect.”
Section 11, unlike the rest of the Statute of Frauds, applies to both realty and personalty. The section, moreover, requires that the grant or assignment of the equitable interest be itself in writing, not merely evidenced in writing. Where the beneficiary of a trust of pure personalty directs the trustees hold the property in trust for another person, the direction must be in writing to be valid.
This is a good reminder of how strictly the law considers the relationship between beneficiary and trustee. The fiduciary duty owed to a beneficiary by a trustee requires that any voluntary assignment of the beneficiary’s entitlement be carefully documented to protect both parties. In the unusual circumstance where a beneficiary assigns his or her interest, the trustee needs to be protected. The beneficiary, in turn, needs to clearly convey to the trustee the nature of any assignment and understand (ideally with independent legal advice) the ramifications of such a decision.
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