Q: We have a special grandson who has lived with us for several years.
We would like to leave him some property. His dad has a new
relationship and in our opinion his fiancée is not good to this boy.
Our concern is leaving property for this boy and having his dad and his
fiancée take control and use the property for their benefit. Is there
some way that we can achieve our goal?
A: There are two principles to remember. First, it is your property and
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you can do with it as you wish. Second, you can leave things for your
grandson without involving your son and his new fiancée. One way to
achieve this would be to create a trust. In a trust, property is held
by a third party, called the trustee, for the benefit of someone else.
Trusts are commonly used when property is left for young children.
You could decide what you want to leave for your grandson and put it in
trust.
To create a trust, you should have a formal document establishing it.
This should designate the property covered by the trust, who will be
the trustee, what powers the trustee will have and who is the
beneficiary of the trust.
For example, you leave $100,000 in trust for your grandson. You name AB
Jones as the trustee. Your grandson JD Jones is the beneficiary. Your
trust agreement should stipulate several things. One is what will
happen to the income earned by the trust. Will it be added to capital
or will it be used for the benefit of JD? If used for JD, will it be
paid to JD’s parents or guardians or will the trustee be given the
discretion to use the funds for JD such as paying for educational
excursions, tuition, music lessons and so on? How is a new trustee
chosen if AB is no longer able or no longer wants to continue as a
trustee? What happens to the funds if something happens to JD such as
dying of illness or accident? Will the capital at some point be paid
out to JD, for example, when he reaches the age of 21? Will the trustee
be compensated for his effort?
Funds held in trust
An alternative to creating a trust immediately is to provide in your
wills that if your grandson is under the age of majority, the funds
will be held in trust for him. Again the will should deal with the
issues outlined previously.
The trustee need not be the parents or guardians of your grandson. It
can be anyone you consider capable of performing this function. If you
create the trust by way of will, the trustee can be the same person as
your executor. You can appoint a trust company to act as a trustee.
Unfortunately, as with any matters involving money and land, there are
often income tax matters to consider and there are legal complexities
involved in creating a trust.
Every province has laws that place certain limitations on trustees and
give the public guardian or public trustee the right to step in to
protect assets of a minor. The rules vary so I recommend that you
consult a lawyer and accountant.
Don Purich is a former practising lawyer who is now involved in
publishing, teaching and writing about legal issues. His columns are
intended as general advice only. Individuals are encouraged to seek
other opinions and/or personal counsel when dealing with legal matters.
