How Does a Trustee Resign From a Trust in Ontario?

Illness, a move, a family falling-out or simply the weight of the job can make a trustee decide they cannot continue. The natural question is whether you can just say you are done.

The short answer is that it depends. The trust document, who the beneficiaries are, and whether someone else is ready to take over all matter. This article walks through the general steps and the obligations that tend to follow a trustee out the door.

Start with the trust document

The first place to look is the will or trust document. Some documents say who may replace a trustee, and how a trustee may step down. Others say nothing. If the document is silent, the options depend on your situation. Which route applies to you is something a lawyer can confirm after reading the document.

Ontario's guidance notes that a court may appoint an estate trustee where there is no will, no trustee is named, or the named trustee asks for confirmation. Whether a trustee's departure from your particular trust needs the court's involvement depends on your situation, so it is worth confirming with a lawyer.

Why you cannot simply walk away

A trustee holds property and has duties to beneficiaries. If you leave without a successor, no one may have the authority to deal with the bank, sign tax returns or protect the property. That gap can hurt the beneficiaries and, in turn, expose you to a complaint.

• Plan how the property will be transferred to someone with proper authority.
• Gather the records so they can be handed over or kept available.
• Keep tax filings current.
• Tell the beneficiaries what is happening and why.

Tax and filing duties around a handover

Tax deadlines keep running. A resident express trust that is not a listed trust must file a T3 return every year, even with no income. The return and any balance owing are due no later than 90 days after the trust's year-end. Most trusts that file must also include Schedule 15 beneficial ownership information.

If you resign part-way through the year, ask an accountant who will be responsible for the current year's return and how information will be passed on.

Accounts, minors and the Office of the Children's Lawyer

Before you leave, you will usually want a clear statement of what you received, what you paid out and what remains. Where a minor or an unborn or unascertained person has an interest, the Office of the Children's Lawyer must be served on an application to pass estate accounts. The Office can also ask an estate trustee for accounts and supporting records, and may ask the court to require an application to pass accounts if the trustee does not respond or the accounts raise concerns.

Whether passing accounts is necessary or sensible for your trust is a question for a lawyer.

Ending the trust instead of replacing the trustee

Sometimes the better answer is to close the trust. Under the principle known as Saunders v. Vautier, beneficiaries of full legal capacity who together hold all the beneficial rights may, with the consent of everyone with an interest, end a trust. Contingent interests are not enough, and a sole competent adult who is absolutely entitled can collapse the trust. If any beneficiary is a minor, unborn or has a contingent interest, this route is generally not available.

What liability remains after you step down depends on what happened while you served. That is why a clean handover and good records are sensible, and a lawyer can advise on your own position.

What to do next

• Read the will or trust document for wording on resignation and replacement.
• List the beneficiaries, including any minors or unborn or contingent beneficiaries.
• Bring tax filings up to date, including any T3 and Schedule 15.
• Prepare a clear summary of receipts, payments and remaining property.
• Identify a willing successor and talk to the beneficiaries.
• See an Ontario estates lawyer before signing anything or handing over property.

Frequently asked questions