Can a Trustee Pay for a Child's Education or Support in Alberta?

A parent has died and left money in a trust for a child. School costs, tutoring, a laptop or living expenses come up, and the question follows: can the trustee use the trust's money for that, and from which pot, income or capital?

In Alberta, the Trustee Act (SA 2022, c T-8.1), in force since February 1, 2023, gives trustees powers to pay income and capital toward a beneficiary's maintenance, education or benefit, with limits attached. This article explains how those powers generally work, so you know what to ask and when to get advice.

This article covers the law of Alberta.

Income payments for a minor: section 47

Trust income is the earnings the trust property produces, such as interest. Under section 47 of 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.

The key words are "reasonable in the circumstances". The trustee has judgment to exercise, but it must be used in good faith and in line with the terms of the trust. A minor in Alberta is someone under 18.

Capital payments: section 48 and its limits

Capital is the underlying property of the trust rather than its earnings. Section 48 allows capital payments for a minor's or an adult's maintenance, education or benefit, again on a "reasonable in the circumstances" basis. The limits matter just as much as the power:

• Court approval is required for a capital payment to a person who has only a contingent interest, meaning their entitlement depends on some future event.
• A trustee must not pay from capital if income is available for the same purpose.
• A trustee must not pay from capital if it would harm a life-interest holder, unless that person consents in writing or the court approves.

A life-interest holder is someone entitled to the income for their lifetime, such as a surviving spouse, with the children receiving what remains later. Using capital early can shrink what that person receives, which is why their written consent or the court matters.

The will still comes first, and duties still apply

The trust instrument, for example the will, prevails over a contrary provision of the Trustee Act unless the Act provides otherwise. A will might widen these powers, narrow them or set conditions, so read its wording first. Certain spousal and alter ego trusts are also carved out of the Act's distributive-power rules unless the instrument expressly provides otherwise. Whether a particular trust falls into that group depends on its terms and is worth confirming with a lawyer.

Even a permitted payment must meet the trustee's general duties. The trustee must act in good faith, in line with the trust's terms and the best interests of the beneficiaries, and use the care of a person of ordinary prudence. The loyalty rule means the trustee must not let personal interest, or a personal benefit, conflict with the trust, unless the law or the trust instrument permits it. The trustee must also stay impartial between classes of beneficiaries. In practice, paying one child's costs generously from a shared fund can affect the others, so the trustee should be able to explain the decision.

Who receives the money, and when it ends

Money payable to or for a minor from a trust goes to a court-appointed trustee or to the Public Trustee. If a will, court order or settlement document names no trustee for a minor's funds, they must generally be held by the Public Trustee, with some exceptions. One exception: where under $25,000 is owed and no trustee is named, the holder may give the funds to the Public Trustee or to the parent or guardian, who must sign a Guardian's Acknowledgement of Responsibility form and act in the minor's best interest. That option does not apply to amounts payable under the Victims of Crime and Public Safety Act or under s. 70(9) of the Workers' Compensation Act, which must be paid to the Public Trustee even if under $25,000.

Funds are paid out at 18 or at the age the trust document specifies, which the Public Trustee cannot change. The Age of Majority Act applies to the words "minor" and "adult" in a document only if the document gives no definition and shows no contrary intention, so a will can set a later age.

If you are unsure or disagree: what to do next

A trustee who is unsure whether a payment is allowed can apply to the court for directions, and following those directions discharges the duty unless they were obtained by fraud, wilful concealment or misrepresentation. A trustee or beneficiary can also apply to court to decide whether a trustee has failed to perform a duty or to consider a power in good faith, and the court may order performance or remove the trustee.

• Read the will's trust clauses and note any age, conditions or special powers.
• Identify who holds which interest: life interest, vested or contingent.
• Check whether income is available before considering capital.
• Keep receipts and a short written note of why each payment was reasonable.
• Ask for written reports; qualified beneficiaries are generally entitled to a report for each fiscal period within 2 months of its end.
• Speak with a lawyer before paying from capital where any interest is contingent.

Frequently asked questions