An estate trustee has strict and quite onerous obligations to the estate they act for. The trustee is obligated to carry out their duties in accordance with the terms laid out in the trust document, and in accordance with the legislation governing their actions.
A trustee cannot vary the terms of a trust unless variation is specifically permitted in the trust document. If a trustee varies the terms without the explicit authority to do so, he or she is in breach of the trust and of his/her fiduciary duties.
If you have been appointed a trustee, the first thing you should do is seek the guidance of an experienced estate lawyer. NULaw and its predecessor firms have advised trustees in Toronto since 1953. Our estate lawyer, Lex Arbesman, has helped hundreds of clients understand the scope of their legal duties and obligations. Lex counsels trustees on the risks and liabilities that attach to their role and recommends best practices to mitigate those risks.
Generally speaking, a court will not interfere with a trust and substitute its own judgment for that of the trust settlor. However, there are four possible grounds on which a court will make a variation: on consent, through the Variation of Trusts Act, via the court’s inherent jurisdiction, and through the court’s jurisdiction over charities.
If all beneficiaries are over 18, have the requisite mental capacity/are legally competent, and agree to vary the trust, the trust can be varied, terminated, or distributed, regardless of the settlor’s original wishes. This is known as the rule in Saunders v. Vautier.
The Variation of Trusts Act empowers the court to approve a variation of the terms of the trust “on behalf of”:
This was mainly a response to the fact that the rule in Saunders v. Vautier only applies to situations in which all beneficiaries are of the age of majority and legally competent.
The court has inherent power to authorize trustees to vary the trust or dispose of specific trust property in several specific and legally technical situations.
Pursuant to S. 13 of the Charities Accounting Act, an order from the court to vary a charitable trust can be obtained in very limited and specific situations:
NULaw and its predecessors have been advising clients with trust variations for over 60 years. We draw on our extensive experience to guide clients through the ins and outs of the trust variation process and help them manage any personal risk as well as any risk to the trust and beneficiaries. Contact us online or at 416-481-5604 for a consultation.