How to Set Up a Trust for a Minor Child in Alberta

If you want to leave or give money to a child, the law does not let a young child simply manage it. You need to decide who will hold the money, how it will be used for the child, and when the child receives it. Without a plan, the default may not match what you would have chosen.

This article compares the two main routes in Alberta: a private trust with a trustee you choose, and the Public Trustee holding funds by default. It also explains the age of majority rules.

This article covers the law of Alberta.

Age of majority and payout age

Under the Age of Majority Act, every person ceases to be a minor on turning 18. A minor's trust may continue beyond 18 depending on the wording of the will, court order or settlement document.

The Act's definitions of minor and adult apply to an instrument only if it gives no definition and shows no contrary intention. A will or trust deed can therefore set a later age for payout. If the trust document sets an age, the Public Trustee cannot change it.

Option 1: a private trust with a trustee you choose

You can name a trustee in a will, court order or settlement document, and set out how and when money is used for the child. Under the Trustee Act, a trustee may pay income toward a minor's maintenance, education, benefit or advancement in life as the trustee considers reasonable in the circumstances. Capital can also be paid for a minor's or an adult's maintenance, education or benefit on the same basis.

There are limits. A capital payment to a person with only a contingent interest requires court approval. A trustee must not pay from capital if income is available for the same purpose, or if the payment would harm a life-interest holder without that person's written consent or court approval. The trust document generally prevails over the Act, unless the Act provides otherwise.

The trustee must also act in good faith, follow the terms of the trust and use the care of a person of ordinary prudence. Choose someone organized and trustworthy, and name a backup. Tax treatment depends on the type of trust; for example, most testamentary trusts pay tax at the highest individual percentage, with exceptions for a graduated rate estate and a qualified disability trust. An accountant can explain your case.

Option 2: the Public Trustee holds the money

If a will, court order or settlement document does not name a trustee for a minor's funds or property, they must be held by the Public Trustee, with some exceptions. The Public Trustee invests in its Common Fund and guarantees it 100%.

Exceptions to know about:

• Where a minor is owed under $25,000 and no trustee is named, the holder of the funds may choose to give them to either the Public Trustee or the parent or guardian. A parent or guardian who takes them must sign a Guardian's Acknowledgement of Responsibility form and act in the minor's best interest. The $25,000 figure is the amount prescribed in the Minors' Property Regulation.
• Amounts payable under the Victims of Crime and Public Safety Act and under section 70(9) of the Workers' Compensation Act must be paid to the Public Trustee even if under $25,000.
• A guardian who receives small-obligation property holds it as trustee for the minor.

Funds are paid out when the person turns 18, or at the age in the trust document. Before payout, the Public Trustee gives an accounting and asks the former minor to sign a Release.

Applying to court to be a minor's trustee

A parent or guardian may apply to court to be the minor's trustee if no trustee is named or the Public Trustee is not required to act. A bond is usually required, and the Public Trustee must be served with the notice of application.

Under the Minors' Property Act, the Court may appoint a trustee if it is in the minor's best interest, considering the proposed trustee's ability and plan. The order may set account reviews, duration, investment limits and compensation, and the Trustee Act applies to the trustee. The trustee must post a bond or security, though a trust corporation is exempt and the Court can waive it.

What to do next

• Decide how much you plan to leave or give and whether it is more or less than $25,000.
• Decide at what age the child should receive the money.
• Choose a trustee and a backup, and talk to them first.
• Ask a lawyer to put the trustee and payout terms in a will or trust document.
• Check whether any funds you expect (insurance, settlements) need their own arrangement.
• Talk to an accountant about tax.

Frequently asked questions