Monday, May 20, 2019

Minor Beneficiaries

Yes, I know the title is ambiguous. I don’t mean beneficiaries who receive a small share of an estate, but rather those who are under the age of majority in British Columbia, which is a person under the age of 19. If a minor is entitled to an inheritance and no trustee has been appointed for her, those funds must be paid to the Public Guardian and Trustee of British Columbia. This happens most frequently when a minor’s parent dies without a will. It may also apply in the case where a minor is left an inheritance by will, but the will does not have a clause appointing a trustee to hold the inheritance for the minor.

Section 153 (1) of the Wills, Estates and Succession Act says:

153 (1)Subject to subsections (2) and (3), if
(a)a minor is a beneficiary or an intestate successor, and
(b)there is no trustee or no trust created for the minor's interest in the estate,
the personal representative, on distribution of the estate, must pay or transfer the minor's interest in the estate to the Public Guardian and Trustee in trust for the minor.
In a recent decision, British Columbia (Public Guardian andTrustee) v. Child 3, 2019 BCCA 171, the Court of Appeal held that it was an error for a Supreme Court of British Columbia judge to order an administrator of the estate of a person who died without a will to order interim distributions directly to a minor’s parent to reimburse her for the child’s expenses and for funds she borrowed to pay expenses. Madam Justice Fisher wrote:

[8]             The language of s. 153(1) is unambiguous. It requires the administrators to pay any distribution of Mr. Yuan’s estate to the PGT on behalf of the minor beneficiaries, as there is no trustee in place.
[9]             There is good reason for this requirement. The PGT is the only trustee for these minor beneficiaries. As the PGT submitted before the chambers judge, it would not be truly acting as trustee if the distribution went directly to Mother 3. For example, in respect of past expenses, the PGT submitted that Mother 3 would be entitled to reimbursement for funds she used to pay Child 3’s expenses but not for funds she borrowed from others; in that case, the PGT would ensure that funds legitimately borrowed for Child 3’s expenses would be repaid to the lenders directly. Given the state of the materials in the record, it is difficult to understand the judge’s outright rejection of the PGT’s submissions.
[10]         It is also difficult to understand the judge’s failure to put his mind to s. 153 of WESA. Ordering specific funds to be paid to Mother 3 for specified purposes is insufficient, in my view, as it is the trustee’s duty to act in the best interests of Child 3 to ensure that the distributions are appropriate for his needs. I agree with the PGT’s submission that the judge’s order created a situation in which the interim distribution of Child 3’s interest was made without an assurance that the funds would be used in a manner consistent with the overall value of his interest in the estate (which is currently uncertain) or his projected needs.
Professionally drafted wills usually contain an “infant’s clause,” which provides that the executor or hold funds in trust for any minor beneficiaries. Alternatively, a will-make may appoint other trustees for minor beneficiaries in the will. Section 153(1) does not apply if a trustee is appointed in the will.

The court may also appoint a trustee for a minor beneficiary. Section 153 (3) provides:

(3) Subsection (1) does not apply if, before distribution of the assets of the estate, the court, on application and with notice to the Public Guardian and Trustee, appoints a trustee to hold and administer the minor's interest in the estate until the minor reaches 19 years of age.
The Family Law Act also has provisions for the appointment of a trustee for minors, which are not limited to inheritance, but may apply anytime a minor is entitled to property. This is set out in section 179:

179 (1) Subject to subsection (2), the Supreme Court on application may appoint one or more persons as trustees over
(a)particular property to which the child is entitled, including any property derived from the property or from the disposition of the property, or
(b)all property to which the child is entitled at the time the order is made and to which the child becomes entitled while the order is in effect, except property
(i)identified in the order, or
(ii)over which a trustee already has authority.
(2)The Supreme Court may appoint a trustee only if satisfied that it is in the best interests of the child to do so, on consideration of all of the following:
(a)the apparent ability of the proposed trustee to administer the property;
(b)the merits of the proposed trustee's plan for administering the property;
(c)the views of the child, unless it would be inappropriate to consider them;
(d)the personal relationship between the proposed trustee and the child;
(e)the wishes of the child's guardians;
(f)the written comments of the Public Guardian and Trustee;
(g)the potential benefits and risks of appointing the proposed trustee to administer the property compared to other available options for administering the property;
(h)if the Supreme Court is considering making an order under subsection (1) (b), that the interests of the child are likely better served by an order made under that subsection than by an order made under subsection (1) (a).
(3) An order made under this section to appoint a trustee may do one or more of the following:
(a)require the trustee to deliver the trustee's accounts at specified intervals for the examination and approval of the court;
(b)limit the duration of the trusteeship;
(c)specify or limit the types of investment in which the trustee may invest the property;
(d)provide for compensation of the trustee including, without limitation, setting rates and specifying when the compensation may be taken;
(e)require the trustee to give security in any form the court directs;
(f)make any other order the court considers appropriate.
(4)Except as provided for in an order made under this section, the Trustee Act applies to the trustee and the trust.
I should note also that a small amount, currently up to $10,000, may be paid to a child’s guardian with parental responsibilities without a court order. This is set out in section 178 of the Family Law Act.

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