A trustee of a trust holds title to and manages the trust assets for the benefit of the beneficiary or beneficiaries of the trust. What if the beneficiaries of a trust do not want the trustee to continue to hold and manage the trust assets, but wish to have control over the assets themselves?
In British Columbia, if all of the beneficiaries of a trust are known, are at least 19 years old, and have full legal capacity, they can compel the trustee to transfer title to the trust assets to the beneficiaries. This is known as the rule in Saunders v. Vautier, based on the 1841 English Chancery Division decision Saunders v. Vautier (1841), 41 E.R. 482.
Let’s take a simple case to illustrate how Saunders v. Vautier may apply to a will. Supposing I leave $10,000 to each of my grandchildren who are alive at my death, but direct my executor and trustee (my “trustee”) to hold on to the money for each grandchild who is under 25 years old until that grandchild reaches 25. (I don’t have any grandchildren yet, but I plan to live for a long time.)
If I have a grandson who is say 17 years old at my death, he may call upon my trustee to pay the money to him when he reaches 19. If my trustee does not pay it, the grandson could sue to compel payment.
However, for the rule to apply, all of the beneficiaries of a trust must be adults with capacity. If I say in my will that my trustee must set aside $10,000 for each grandchild who is under 25 when I die, and then I further say in my will that if a grandchild dies before 25, leaving children who survive that grandchild, those children (my great-grandchildren) take my grandchild's share, then we have to consider each grandchild’s own children.
Let’s go back to the grandson who is 17 at my death. I have revised my will to provide that if a grandchild does not live to 25, the grandchild’s own children will divide the $10,000 gift. If on his 19th birthday, my grandson asks my trustee for the $10,000, my trustee should say, “You are not the only beneficiary of this trust of $10,000. I have to consider the interests of your children, who could inherit this money if you die before your 25th birthday. ” My grandson might say, “But I don’t have any children.” To which my trustee should reply, “Yes, but you may have children before your 25th birthday.” In this example there are unborn contingent beneficiaries (contingent because they would only receive something if their father dies before 25), who do not have legal capacity to agree to a distribution of the $10,000. The rule in Saunders v. Vautier does not apply.
Not all Canadian provinces have maintained the rule in Saunders v. Vautier. I understand that in Alberta and Manitoba, and perhaps other provinces, the provincial legislatures have passed laws abolishing or modifying the rule in Saunders and Vautier.
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