Can a Trust Be Changed in Ontario? Court Approval Explained

A trust is meant to last, but families change. Perhaps the trustees need wider powers, or the people involved want to rearrange or end the trust. The difficulty comes when some beneficiaries cannot agree for themselves because they are children, are incapable, or have not been born yet.

In Ontario, a court process exists for that situation. This article explains what the court can approve, the test it applies, who must be involved, and why the tax side of a trust can be a reason to look at changes. It is general information, not advice on your own trust.

What the Variation of Trusts Act allows

Under section 1(1) of the Variation of Trusts Act, the Superior Court of Justice may approve an arrangement that varies or revokes a trust, or that enlarges the trustees' powers. The court gives that approval on behalf of people who cannot consent themselves.

The people the court can consent for fall into four groups:

• Minors, who in Ontario are people under 18.
• Incapable persons.
• Unborn persons.
• People who may have an interest under a discretionary power.

The court's role is to step in for those who cannot.

The benefit test

The court will not approve a variation on behalf of a minor, incapable or unborn person unless it appears to be for that person's benefit. This test applies to those three groups.

So a proposal that helps the adults but leaves a child worse off is unlikely to be approved on that child's behalf. When you prepare a proposal, it helps to explain clearly how each person who cannot consent is better off, or at least not disadvantaged.

The Children's Lawyer and who must be served

Where a minor or unborn person has an interest, the Office of the Children's Lawyer must be served with the application to vary the trust. The Office of the Children's Lawyer represents the child and does not take instructions from the parents.

That means parents cannot simply sign off on behalf of their children. Expect the Children's Lawyer to look at the proposal independently, and allow time for that in your planning.

Limits, court advice and tax reasons to look at a variation

The trust's own terms still matter. The Trustee Act's investment powers do not authorize or require a trustee to act inconsistently with the terms of the trust. If the terms are the obstacle, a variation may be the route to change them.

A different tool applies when trustees only need guidance. A trustee may apply to the Superior Court of Justice, without starting an action, for the court's opinion, advice or direction on managing trust property. That is not the same as changing the trust's terms.

Tax can be a reason to review a trust. Generally, a trust is deemed to dispose of its capital property at fair market value every 21 years. Spousal, alter ego and joint partner trusts are different, because their first deemed disposition happens on the beneficiary spouse's death, or the later of the two deaths. A trust's taxable income is also generally taxed at the top personal rate, except for graduated rate estates and qualified disability trusts. Whether a variation helps or hurts your tax position depends on the facts, so confirm it with an accountant or lawyer.

What to do next

• Get a copy of the trust document and any amendments.
• List every beneficiary and note who cannot consent: minors, incapable people, unborn people or discretionary beneficiaries.
• Write down the change you want and how it benefits each person who cannot consent.
• Speak with a lawyer about whether a court application is the right route, or whether advice and directions would do.
• Ask an accountant how the change could affect the trust's tax position.
• Plan for the Children's Lawyer to be served if a minor or unborn person has an interest.

Frequently asked questions