Re Zaleschuk

 

Discretionary trusts are often drafted broadly permitting the trustees “absolute and uncontrolled discretion.” This may be so, even when the will maker or settlor had in mind creating a benefit for one beneficiary. Courts are reluctant to interfere with the trustee’s discretion in such cases, as long as the trustee is acting reasonably and in good faith.

In a recent case, Re Zaleschuk, 2022 BCSC 943, Justice A. Ross declined to remove trustees who had refused various requests for funds made by a beneficiary’s mother on behalf of the beneficiary. After Kenneth Zaleschuk (“Kenneth Sr.”) was diagnosed with cancer in 2014, he settled a trust for his son, Kenneth Jr., a young adult who had a learning disability and was unable to live independently. Kenneth Sr. was the initial trustee, and named his sisters as his successor trustees. His sisters became the trustees following Kenneth Sr.’s death in 2015.

Kenneth Jr. lived with his mother Marina Zaleschuck. She and Kenneth Sr. and divorced and there was evidence from Kenneth Sr.’s lawyer and financial advisor that in settling the trust, Kenneth Sr. was concerned about protecting the funds from his former spouse, and making sure there were sufficient funds for his son for life.

The trustees refused several requests from Marina for funds for Kenneth Jr. including funds for a motorized scooter, glasses, massage and acupuncture treatments, a new phone, a new laptop, travel expenses for a trip to Europe and a new headboard.

A petition was filed for Kenneth Jr. to remove his aunts as trustees and replace them with his mother. Although the petition was brought in his name, the trustees alleged that the litigation was being driven by his mother who had a power of attorney for him.

The trustees had provided funds totaling about $26,000 for Kenneth Jr. including travel expenses for trips with his sister, Marie, glasses and a helmet. They provided reasons for denying Marina’s requests including that she did not follow the procedure they put in place for requests, that they considered that some expenses were for items he did not need or, in the case of the scooter, potentially dangerous, and that some of the expenses were potentially covered under his disability benefits. They were willing to step aside as trustees provided that a professional trustee was appointed, but opposed Marina becoming the trustee.

In declining to remove the trustees, Justice Ross found that they were acting properly within the scope of their discretion. Justice Ross wrote:

[80]         Despite the criticisms leveled by the petitioner, I note that:

a)    the Trustees have released Trust funds to the benefit of Kenneth Jr. for travel and other items;

b)    they have considered and rejected other expenditures on the basis that they were not in Kenneth Jr.’s best interests (e.g., the motorized scooter) or they were unsure whether the Province may be reimbursing the expense;

c)     their actions have resulted in the capital increasing by more than $200,000 since 2015.

[81]         Although complaints have been leveled regarding the decisions of the current Trustees, I accept their submission that the Trust Deed imbues them with the full discretion to decide whether to pay amounts out of the Trust. On that point I accept this overarching submission of the Trustees:

They are exercising their discretion (as provided in the provisions of the Trust Deed) to make sure that there are sufficient funds to care for Kenneth Jr. for the rest of his life. At present, Kenneth Jr. lives with his mother and his regular expenses are covered by his disability benefits paid by the Province. At some point in the future, he will not be able to rely on living with his mother. The Trustees are administering the Trust in a fashion that will best ensure that there are funds available for his care in his later years. The Trustees submit that the Trust Document provides them with the full discretion to make those decisions.