Inheritance for a Minor Child: Trusts and the PGT in BC

When a parent, grandparent or other relative dies and leaves money to a child who has not yet reached the age of majority, families often ask who looks after it. The answer depends on the will, on whether there is a will at all, and on who is available to act.

This article explains the main paths in British Columbia, including how a trust works. Whether the Public Guardian and Trustee (PGT) has any role depends on your situation, so it is worth confirming with a lawyer. How it applies to your family depends on the facts, so use this as a starting point for questions.

This article covers the law of British Columbia.

How a child ends up inheriting

A child may inherit under a will, on an intestacy, or through a court order. If there is no will and no spouse, the intestate estate goes to the descendants in equal shares. If there is a spouse and descendants, the spouse takes household furnishings plus a preferential share of $300,000 if all descendants are common to both, or $150,000 if not, and the residue is split half to the spouse and half to the descendants.

A child who is not adequately provided for by a will may also have a wills variation claim, which must start within 180 days after the grant is issued in BC. Someone acting for the child would need to consider that deadline.

Why the money does not go straight to the child

The estate vests in the personal representative without further declaration or order, and the personal representative must not distribute the estate within 210 days, subject to exceptions in the section. So even an adult beneficiary waits. A child's share needs someone to hold it in the meantime.

Who that is depends on the will. A will may set up a trust and name a trustee to hold the child's share until a stated age or event. A testamentary trust is generally created on and as a result of an individual's death. If the will does not set this up, how a child's share is held depends on the facts, so it is worth confirming with a lawyer. Ask a lawyer how this works for your situation.

What a trustee must do

• Invest only in property in which a prudent investor might invest, and not in a manner inconsistent with the trust.
• Use the care, skill, diligence and judgment a prudent investor would use.
• Avoid being held liable for a loss when the conduct conformed to a prudent plan or strategy with reasonable assessment of risk and return.
• If investment authority is delegated to an agent, set the investment objectives and act prudently in choosing, instructing and monitoring the agent. Delegation is not allowed where the trust requires the trustee to act personally.
• Obtain a court order passing their first accounts within 2 years of the grant or appointment, as executors, administrators and testamentary trustees must do. This does not apply if all beneficiaries approve the accounts in writing or the court directs otherwise.

Accounts matter because beneficiaries rely on the trustee to report on how the money is handled. On notice from a beneficiary, a trustee must pass accounts annually. A trustee may receive a fair and reasonable allowance not exceeding 5% of the gross aggregate value of the estate, and may apply for an annual care and management fee not exceeding 0.4% of the average market value of the assets. These limits do not apply where the trust instrument sets the allowance.

A court may relieve a trustee from liability for a breach of trust if the trustee acted honestly and reasonably and ought fairly to be excused.

Trusts, taxes and benefits

A trust may need to file a T3 return no later than 90 days after its tax year-end, and any balance owing should be paid in the same 90 days. Whether and how that applies to a particular trust is something for an accountant to confirm.

If the child receives BC disability assistance, a discretionary trust is not treated as an asset if the client has no way of collapsing it and gaining control of the assets. A non-discretionary trust counts as an asset and is exempt only where the amount contributed does not exceed $200,000. Assets held in a Registered Disability Savings Plan are exempt, and RDSP payments are exempt as income and assets. Rules on these points vary by ministry guidance, so confirm the current position before setting anything up.

What to do next

• Find out whether there is a will and whether it creates a trust for the child.
• Identify who is named as executor and trustee, and whether they are willing to act.
• Note the date a grant is issued, because the 180-day period for a wills variation claim runs from it.
• Ask a lawyer whether the Public Guardian and Trustee has any role in your situation.
• Tell your lawyer if the child receives disability benefits.
• Speak with an accountant about the trust's T3 filing.

Frequently asked questions