A new Alberta provincial Trustee Act was introduced as Bill 12 on March 29, 2022 and was passed by the legislature on April 29, 2022. Once proclaimed into force, the new Trustee Act (the New Act) will provide a modern framework for trust law in Alberta. Overall, the new Trustee Act clarifies the responsibilities and powers of trustees and will provide greater protections for beneficiaries. Additionally, the new provisions would reduce administrative burdens imposed by trust law, as it lessens the need for court involvement in the functioning of trusts. Here is an overview of the major changes proposed by the new legislation.
Lessening Administrative Burdens
The New Act makes changes which reduce the need for court applications. For example, the New Act stipulates that if a trustee is temporarily unable to administer the trust due to absence or incapacity, they may appoint an alternate temporary trustee to exercise their powers and perform their duties. If the trustee is unable to appoint this temporary trustee, then a designated person may do so. If this situation were to arise under the existing Trustee Act (the Old Act), a replacement trustee could only be appointed by court application.
Similarly, a court application is no longer required under the New Actto vary the terms of the trust. In the proposed legislation, the default rule is still that a variation requires approval from the court; however if the trust instrument reserves the power to any person to vary or terminate the trust, that person will have the power to do so.
Greater responsibilities and powers for Trustees
Under the proposed legislation, there are greater responsibilities for the trustees, and correspondingly, greater protections for beneficiaries. The New Act imposes a duty of care on trustees, a duty to report financial information to beneficiaries, a standard of care when investing, and a duty to act impartially and prudently between all beneficiaries and in the administration of the trust. To further address the needs of beneficiaries, the New Act provides a process to permit the removal of an unfit trustee and to allow a trustee to resign.
In addition to expanding a trustee’s responsibilities, trustees’ powers have also grown. Under the NewAct, trustees have enhanced administrative powers to buy and sell trust property, including the power to sell and lease real property. Further, a trustee is granted the power to borrow trust property or to grant a security interest in trust property. A further example of a trustee’s expanded power is that they may utilize trust income or capital to provide residence to a beneficiary.
Other notable changes
The Old Act mostly adresses testamentary trusts (trusts established by way of a will); however, the New Act also recognizes various other forms of modern trusts, including non-charitable purpose trusts.
The New Act abolishes some of the previous common law trust law rules. For example, section 37abolishes the rule that required overseeing a trustee’s decisions on an investment-by-investment basis, as well as the rule that damages for breach of trust are prohibited from being offset by gains. Furthermore, the New Act abolishes the common law rules of apportionment.
The new Trustee Act presents a complete overhaul of the existing legislation in Alberta. These changes will likely produce a more efficient trust law system, making it easier to create and manage trusts. If you have any questions about the New Act, or anything to do with trusts or estates, please feel free to contact one of our lawyers.
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This article was written by Monika Sharma and Olivia Wang.