What Happens to a Trust When the Trustee Dies in Alberta

A trustee's death can leave beneficiaries and co-trustees unsure about what comes next. Money may be waiting to be paid out, bills may need paying, and nobody is sure who has authority to act.

This article explains the general picture under Alberta's Trustee Act. It cannot tell you exactly who takes over in your situation, because that turns on the trust document and the facts. A lawyer can confirm the answer for your trust.

This article covers the law of Alberta.

Start with the trust document

Many trusts say what happens if a trustee dies. A will that creates a trust, a trust deed or another trust document may name a replacement or set out how one is chosen. Under the Trustee Act, the trust instrument, such as a will, prevails over a contrary provision of the Act unless the Act provides otherwise.

For a trust created by will, the person who made the will counts as the settlor under the Act. The current Trustee Act, SA 2022, c T-8.1, replaced the former Trustee Act and was proclaimed in force on February 1, 2023. It applies to trusts created before, on or after the date its section 2 came into force.

Does the trust continue?

Whether a trust carries on after one trustee dies depends on the trust document, how many trustees there were, and the Act's rules on appointing trustees. If there were co-trustees, the trust document may allow the survivors to carry on. Your document and a lawyer's review will show which situation you are in.

Do not assume the trust has ended or that the assets now belong to anyone in particular. Trust property is held for the objects of the trust, meaning the beneficiaries or purposes.

What the remaining trustees must keep doing

A trustee's death does not switch off the duties of the trustees who remain. Each trustee must act in good faith and follow the terms of the trust, the best interests of the objects of the trust, and the Act. Each must also use the care, diligence and skill that a person of ordinary prudence would use in dealing with another person's property, subject to s. 35 of the Trustee Act, and a trustee with specialized or professional skill is held to a higher standard that reflects that expertise.

• Invest trust funds prudently, aiming for a reasonable return while avoiding undue risk, and review investments periodically.
• Deliver a report for each fiscal period to qualified beneficiaries within 2 months after the end of the fiscal period.
• Avoid conflicts between personal interest and trust duties unless the law or the trust instrument permits them.
• If you use an agent, select the agent personally, supervise reasonably and prudently, and do not delegate the discretion to distribute trust property to beneficiaries.

A qualified beneficiary is one with a vested beneficial interest in the trust property, or one who has given written notice that they want to be one and has not withdrawn it. Many reporting and notice duties run to these beneficiaries.

A trustee is not liable for a co-trustee's breach unless the trustee took part in it through their own acts or omissions. A former trustee remains liable for breaches committed while in office. How that applies to a deceased trustee's own estate is a question for a lawyer.

When the court can help

If the way forward is unclear, a trustee may apply to the court for directions. Following those directions discharges the duty, unless they were obtained by fraud, wilful concealment or misrepresentation. Evidence can be admitted to determine the settlor's intention.

If a trustee is not doing the job, a trustee or beneficiary may apply to the court to decide whether a trustee has failed to perform a duty or to consider a power in good faith. The court may order performance or remove the trustee. Where there are three or more trustees, a majority may remove a trustee in limited situations, such as a trustee who consistently ignores communications, if that harms the trust's proper administration.

If trust money is owed to a minor, special rules apply. Money payable to or for a minor from a trust goes to a court-appointed trustee or to the Public Trustee. The court may appoint a trustee for a minor's property if that is in the minor's best interest.

What to do next

• Find the trust document and any will, and read what it says about replacement trustees.
• Confirm how many trustees there were and who is still acting.
• Keep the trust's records and accounts together, and avoid making large distributions until you know who has authority.
• As a beneficiary, ask the remaining trustees for information. If you are a qualified beneficiary, you are entitled to the periodic report.
• Get legal advice on appointing a replacement, or on whether a court application is needed.

If a beneficiary is refused information, a qualified beneficiary can apply to the court for disclosure. Trustees may also need advice on tax filing, which a lawyer or accountant can confirm.

Frequently asked questions