Varying a Trust: Courts Approving Trust Fund Modifications

In the estate planning process, people commonly use trust accounts to give gifts. They can also create purpose trust accounts, which designate funds for a specific purpose. Some common trust accounts that are made in wills include:

• Trust accounts made for minors to give them parts of the account at certain intervals or milestones of their life;
• Purpose trust accounts, where the contents are to be spent for a specific purpose (such as a pet trust account);
• Trust accounts made for children in a past relationship, where the funds can be used by the testator’s spouse until their death; or,
• Trust accounts for disabled beneficiaries.

Purpose Trusts and Estate Planning

Trusts can have lengthy terms or be in effect for many years before the beneficiary recieves the entire gift. Sometimes the terms of the trust become outdated, preventing the beneficiary from using the trust to its fullest potential. The courts are sometimes able to vary the terms of the trust to create more realistic and useful terms.

In essence, the terms and overall purpose of a trust can be anything that the testator wishes. This sometimes causes unrealistic conditions in trusts. For example, a person writes in their will, ”$100,000 is to be put in a trust account for my daughter. These funds are to be used to support her future schooling. My daughter will only be entitled to withdraw from this trust account for the purpose of paying overdue library books.” While this trust has a beneficial purpose, it is not realistic that the daughter will require $100,000 to pay overdue books. In this case, the courts could vary the trust for the daughter, adjusting the terms to better reflect the overall intention of the trust and enable the daughter to use the trust to support her education more effectively.

Trust and Settlement Variation Act

In BC, the Trust and Settlement Variation Act (TSVA) specifies the conditions in which the courts are able to vary a trust. Any interested party is able to come forward before the courts to request a variation. The courts have the discretion to either approve the request and vary the trust, to revoke the trust or enlarge the powers of the trustee. Variations occur most commonly with trusts that the beneficiary cannot reasonably utilize, although the courts have no specific criteria for approving a request.

Who Can Request a Trust Variation

The TSVA is intended to benefit people who are incapable of defending their legal and personal interests. It specifies the following people are able to have a trust variation request filed on their behalf:

1. Any person having, directly or indirectly, an interest, under the trusts who by reason of infancy or other incapacity is incapable of assenting,
2. Any person, whether ascertained or not, who may become entitled, directly or indirectly, to an interest under the trusts as being at a future date or on the happening of a future event a person of a specified description or a member of a specified class of persons,
3. Any person unborn, or
4. Any person in respect of an interest of the person that may arise by reason of a discretionary power given to anyone on the failure or determination of an existing interest that has not failed or determined.

The TSVA allows people to act on behalf of unborn babies, minors and incapacitated people. The courts allow any person to act on any of the above person’s behalf.

Varying an Unreasonable Trust Account

Let’s examine the example above. Assuming the daughter was a minor at the time, her guardian might recognize the bizarreness of the trust terms and request it be varied. One might propose to remove the restriction on spending the funds on overdue books. This way, the trust still honours its intentions (supporting her schooling) and becomes reasonably useful to the beneficiary. The guardian could request a provision that entitles the daughter to the remaining funds after she completes her education.

In the end, the TSVA is designed to ensure trusts can fully benefit their respective beneficiaries. If you believe a loved one should have their trust inheritance modified to their benefit, contact an experienced estate lawyer today.

Have a question about this topic or a different legal topic? Contact us for a free consultation. Reach us via phone at 250-888-0002, or via email at info@leaguelaw.com.