Can a Trustee Also Be a Beneficiary of the Same Trust in Alberta?

It is very common to be named as both trustee and beneficiary. A spouse might manage the trust and also receive income from it, or one adult child might be trustee for the estate that will be shared with siblings. Being in both roles puts you in a position where your interests and your duties can pull in different directions.

This article explains how Alberta's Trustee Act deals with that overlap, what you cannot do, and how to act so that the other beneficiaries have no reason to complain.

This article covers the law of Alberta.

It depends on the document, and your duties come first

The Trustee Act has no separate section on a trustee who is also a beneficiary. The general loyalty rule applies instead. A trustee must act solely in the interests of the objects of the trust, which means the beneficiaries or purposes, and must not knowingly allow a conflict between personal interest and trust duties, or a personal or third-party benefit, unless the law or the trust instrument permits it.

The exception is important. A will or trust deed can expressly allow a named trustee to also take as a beneficiary and to act despite that interest, because section 28(2) allows what the trust instrument expressly permits, and the instrument generally prevails over a contrary provision of the Act. So the first step is always to read the wording of the document.

Conflicts and self-dealing

Being a beneficiary does not loosen your duties as a trustee, because the loyalty rule applies to every trustee. Qualified beneficiaries are still owed reports, and a qualified beneficiary or a beneficiary who asked for information can apply to the court for disclosure. As a trustee-beneficiary you must not use the office to gain a personal benefit beyond what the law or the trust instrument expressly permits. The same general rule covers a trustee wanting to buy trust property, since there is no separate section for it.

Examples of situations that need care:

• Buying an estate asset yourself, or selling trust property to a business you own.
• Choosing distributions in a way that favours you over other beneficiaries.
• Living in or using trust property without a clear arrangement the document or the law allows.
• Paying yourself beyond what you are entitled to for your work.

If you think an otherwise prohibited step is genuinely in everyone's interest, the court can help. On application by a trustee or qualified beneficiary, it may permit an act that would breach the conflict rules, or excuse a trustee from liability, if that is in the best interests of the objects. Notice must go to qualified beneficiaries and, in certain cases, to the Public Trustee or the Minister.

Acting fairly toward the other beneficiaries

You must act in good faith, in accordance with the terms of the trust and in the best interests of the objects of the trust, not just your own share. The Act says a trustee must act impartially between classes of beneficiaries, and investment planning must consider that impartiality. In practice, a trustee who is also a life-interest holder cannot favour income at the expense of those who inherit later, or the reverse.

Other core duties still apply to you:

• Invest prudently for a reasonable return while avoiding undue risk, and review investments periodically.
• Use the care and skill of a person of ordinary prudence, or a higher standard if you have professional skill.
• Deliver a report for each fiscal period to qualified beneficiaries within 2 months after it ends, and allow inspection of source documents on written request.
• Do not delegate the discretion to distribute trust property to beneficiaries.

A qualified beneficiary is one with a vested beneficial interest, or one who has given written notice that they want to be one and has not withdrawn it. Some information need not be disclosed on grounds such as confidentiality, but a qualified beneficiary or a beneficiary who asked for information can apply to the court for disclosure.

Payment, expenses and what happens if you are challenged

A trustee is entitled to fair and reasonable compensation from trust property, and trustees are not presumed to be entitled to equal compensation. A trustee may reimburse administration expenses from trust property without prior court authorization. Interim compensation without court approval is allowed only if at least one beneficiary of full capacity has a vested interest, and written notice must be given first, with an objection period of at least 2 months. If you take more than the court later allows, you must restore the difference.

If another beneficiary believes you have failed in a duty, they can apply to the court, which may order performance or remove the trustee. A court may also order that your accounts be passed. A court can relieve a trustee wholly or partly from liability if you acted honestly and reasonably and ought fairly to be excused. An exemption clause in the document may relieve liability according to its terms, but the court can declare it ineffective if conduct was so unreasonable, irresponsible or incompetent that relief is not warranted. If you are uncertain how to proceed, you can apply for the court's directions.

What to do next

• Read the will or trust deed for any clause that expressly allows you to act despite your interest.
• Keep trust money separate and keep clear records of every decision and payment.
• Give qualified beneficiaries their reports on time.
• Write down your reasons before any decision where your interest overlaps with the trust.
• Get legal advice before buying trust property, taking compensation, or making any distribution that benefits you.

Frequently asked questions