Governing Document – Where the trust is established in writing, the governing document is the trust deed which is also sometimes referred to as a deed of settlement. Some trusts can be created verbally in which case there is no trust deed and this can make administration more difficult. Also, some trusts can be created by operation of law in which case the governing document might be in the form of a court order.
Other relevant documents in the administration a trust can include: contracts, investment agreements, insurance policies and loan agreements.
Proof of Authority – In Canada there is no process similar to probate for proving the validity of a trust. They are presumed to be valid if they appear to meet the legal requirements for the proper formation of a trust (requirements may vary depending on the specific type of trust and property to be held in it). However, a legal opinion can be obtained regarding the formation of the trust to confirm its compliance with the law.
Tasks – Every trust is different so it is important for the trustees to understand not only the general legal rules but the specific requirements for their trust which is why all relevant documentation needs to be collected up at the start and carefully reviewed. Professional assistance may be needed to understand the contents of the trust deed and any other relevant documents.
Typical tasks a trustee is expected to complete include, but are not limited to: locate and review all governing and other documents; locate and secure all property of the trust; determine any liabilities of the trust; develop a plan for the management of the trust property; retain professional advisors to assist as required; file tax returns for all tax years of the trust; establish any further trusts created under the initial trust deed and develop a plan for the management of that trust property unless there are separate trustees; *maintain records of the management of the trust(s); report to beneficiaries of the trust(s) as appropriate; satisfy all debts of the trust and obtain discharges; distribute the income and capital of the trust(s) according to the terms of the trust(s); obtain releases from the beneficiaries of the trust(s); wind up the trust(s) at the required time; pass trust accounts and obtain a discharge from the court if required.
This is not a conclusive list and the tasks are not necessarily listed in the order to be completed. Trustees should obtain professional advice to determine exactly what tasks need to be completed in their particular circumstances.
*In order to maintain a record of the management of the trust as suggested in the task list, it is recommended that a minute book, similar to the ones used for corporate records, be set up for each trust. The trust record book should include: the original trust deed or at least a copy of it; a copy of the original settlement item; a tab for all amendments to the trust; a tab for all resolutions of the trustees including resolutions to establish distributions from the trust; a ledger showing a list of trustees, the date they were appointed and the date they resigned or were removed; a ledger showing a list of all beneficiaries, the date they became a beneficiary and the date, if any, they ceased to be a beneficiary along with reason for ceasing to be a beneficiary; a tab for the trust accounts maintained in prescribed court passing format (not accounts in the normal accounting sense); and a tab for copies of any financial statements related to the trust; any other relevant information.
Coming soon – a PDF checklist for trust administration.