Tag: trust funds
Acting as a Trustee is not only an onerous task but comes with a significant exposure to personal liability.
A trust can be established where three certainties are present: (a) certainty of intention – the Trustee knows that he or she will hold property for the benefit of another; (b) certainty of the subject matter – the property to be held by the Trustee is clearly identified; and (c) certain of objects – the beneficiary of the trust is clearly established.
In Ahmed v. Ibrahim, 2016 ONSC 6430 (ONSC Div. Court), the mother of the plaintiff (Amina) received a settlement payment from a motor vehicle accident. The settlement funds totalling $27,335.03 were deposited into Amal’s bank account. At the time of the deposit, Amal had $19,656.00 in her account. Upon receiving the settlement funds and on Amina’s request, Amal transferred the balance of her bank account (i.e. $46,996.03) to her mother. Amina in turn transferred the funds to a bank account owned by Mohamed (the “Trust Funds”). Believing the Trust Funds belonged to Amina, Mohamed agreed to hold the funds in trust. When Amal demanded her share of the Trust Funds, Mohamed advised that he had already disbursed all of the Trust Funds to Amina in accordance with Amina’s instructions.
Amal sued Mohamed and Amina. At trial, Amina argued that the Trust Funds belonged solely to her and that Amal had no entitlement to the Trust Funds. Amal, however, presented sufficient evidence to show that $19,656.00 of the Trust Funds belonged to her and that none of the funds disbursed by Mohamed had been used for her (Amal’s) benefit. It was Mohamed’s evidence that he believed the Trust Funds belonged solely to Amina and that, in any event, Amina told him the Trust Funds withdrawn by him were used for Amal’s benefit. The judge preferred Amal’s version of the events over Amina and ordered Mohamed, to pay $19,656.00 to Amal.
On appeal Mohamed argued that the trial judge’s decision against him should be reversed because he acted properly in withdrawing the funds, on Amina’s instructions, because he believed the Trust Funds belonged to solely to Amina. In upholding the trial judge’s decision, the Divisional Court held that the trial judge’s findings of fact were owed deference since he had the opportunity to assess the credibility of the parties and accordingly the decision should stand.
This decision is a good example of how easily a trust can be created and a Trustee can attract personal liability even when acting honestly upon mistaken facts.
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Lawyers frequently take funds into their trust accounts on behalf of clients and others. Usually, it is not difficult to determine to whom those funds belong. However, what happens when the beneficial owner of funds held in trust cannot be identified or located?
In Ontario, section 59.6 of the Law Society Act permits a lawyer (or licensed paralegal) who has held money in trust for or on account of a person for at least two years to apply for permission to transfer the money to the Law Society of Upper Canada (“LSUC”) if,
- The lawyer has been unable to locate the person entitled to the money despite having made reasonable efforts throughout a period of at least two years; or
- The lawyer is unable to determine who is entitled to the money.
The application procedure for transferring the money to LSUC is set out in By-Law 10.
You must complete and file the licensee application form, which will be reviewed by LSUC. Upon completion of the review, LSUC will notify you whether permission to transfer the money to it has or has not been granted.
If permission is granted, you must,
- Send a trust cheque, made payable to "The Law Society of Upper Canada, in Trust", in an amount equal to the amount of money for which you have received permission to transfer; and
- Send copies of your financial records relating to the money which you have been permitted to transfer.
Permission to transfer money will typically be subject to the condition that you inform LSUC immediately if you obtain any new information relating to any person entitled to the money that was transferred.
Once the money has been transferred, your liability as trustee or fiduciary with respect to the amount transferred is extinguished.
See the LSUC website for more information.
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Listen to The Potential of The Testamentary Trust
This week on Hull on Estate and Succession Planning, Ian and Suzana continue to focus on testamentary trusts, the most common estate-planning step after the simple will.
In this episode of Hull on Estates, Ian and Suzana talk about a few case studies, the topic of substantial gifts to animals, and the community of podcasting.