A Trustee's Duties Under the Alberta Trustee Act Explained

Being named a trustee can feel like an honour until you realize how much responsibility comes with it. You hold property for other people, and the law sets standards for how you manage it.

This article walks through the main duties in Alberta's Trustee Act, SA 2022, c T-8.1, and explains what can happen if a trustee falls short. It is general information only.

This article covers the law of Alberta.

The law that applies to you

The current Trustee Act replaced the former Trustee Act, RSA 2000, c T-8, and was proclaimed in force on February 1, 2023. Older materials may refer to different section numbers, so check that any guide you read matches the current Act.

The trust instrument, such as a will, prevails over a contrary provision of the Act unless the Act provides otherwise. Some rules cannot be overridden, such as section 84. Many reporting and notice duties run to qualified beneficiaries, meaning beneficiaries with a vested beneficial interest, or those who have given written notice that they want to be one.

Good faith, care and loyalty

A trustee must act in good faith and in accordance with the terms of the trust, the best interests of the objects of the trust, and the Act. Objects means beneficiaries or purposes.

A trustee must use the care, diligence and skill that a person of ordinary prudence would use in dealing with another person's property. A trustee with specialized or professional skill is held to a higher standard that reflects that expertise.

On loyalty, a trustee must act solely in the interests of the objects of the trust 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. If you are also a beneficiary, you must not use the office to gain a benefit beyond what the law or the trust instrument expressly permits. A will can expressly allow a trustee to also take as a beneficiary.

On application, a court may permit an act that would otherwise breach the conflict rules, or excuse the trustee, if that is in the best interests of the objects. Notice must go to qualified beneficiaries.

Impartiality, investing and delegating

• Impartiality: a trustee must act impartially between classes of beneficiaries, and investment planning must consider that.
• Investing: invest trust funds prudently, seeking a reasonable return while avoiding undue risk, and review investments periodically.
• Investment losses: a trustee is not liable if a reasonably skilled and prudent trustee could have made the same decision.
• Delegating: personally select the agent, be satisfied they are suitable, set the terms and supervise them reasonably and prudently.
• Distributions: a trustee must not delegate the discretion to distribute trust property to beneficiaries.

Records, reports and pay

A trustee must deliver a report for each fiscal period to qualified beneficiaries within 2 months after the period ends. On written request, beneficiaries may inspect the source documents. Keep clear records from the first day.

There are limits. A trustee need not disclose certain information, for example information the trustee considers detrimental, burdensome or confidential, and a qualified beneficiary can apply to the court for disclosure. The court may also order that a trustee's accounts be passed.

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 requires written notice first, with an objection period of at least 2 months, and at least one beneficiary of full capacity with a vested interest.

What happens if a trustee breaches a duty

A trustee or beneficiary may apply to the court to determine whether a trustee has failed to perform a duty. The court may order performance or remove the trustee.

With three or more trustees, a majority may remove a trustee who fails to show ordinary prudence, consistently ignores communications or won't cooperate, if that harms proper administration. Removal takes effect 15 days after delivery unless the trustee requests a meeting.

A trustee is not liable for a co-trustee's breach unless they took part through their own acts or omissions, and a former trustee remains liable for breaches committed while in office. Trustees may claim contribution and indemnity from each other.

The court may relieve a trustee wholly or partly from personal liability if they acted honestly and reasonably and ought fairly to be excused. An exemption clause in the trust instrument generally works according to its terms, but a court may declare it ineffective where the conduct was so unreasonable, irresponsible or incompetent that the trustee ought not to be relieved.

What to do next

• Read the trust document closely before acting.
• Keep a separate account and a written record of every receipt, payment and decision.
• Diarize the date each fiscal period ends so reports go out on time.
• If you are unsure what to do, a trustee may apply to the court for directions.
• Get legal advice before paying yourself or buying trust property.

Frequently asked questions