Trust and Settlement Variation Act
If you are the beneficiary of a trust and are facing a long waiting period to receive your inheritance, this may be of interest to you.
Trusts are a common device to provide a secure stream of income for another person, usually family members. This is done by creating a trust with a specific purpose (e.g. my grandson’s education) or through a will. Pension funds are also trusts and are subject to variation under the Pension Benefits Standards Act.
The trustee of the fund created may periodically make payments directly to the beneficiary or to a guardian should the beneficiary be under 19 years of age or disabled. But the main body of the fund is held by the trustee.
Trusts are often created to endure for a very long period of time. Often the beneficiary would prefer to have the money now rather than at some point in the distant future. This is especially so with investment returns currently being so low. There are situations where it is beneficial for all concerned that the terms be varied or the trust be collapsed completely.
The courts many years ago established a rule (Saunders v. Vautier) that if a beneficiary is an adult and there are no contingent beneficiaries, then the beneficiary can ask that the trust be collapsed and the money paid to him or her. A contingent beneficiary is a person or entity who would inherit the remainder of the fund should the beneficiary die before the remainder of the fund vests in the primary beneficiary.
However, most trust terms provide for designated contingent beneficiaries and that avoids the rule in Saunders v. Vautier. This does not mean that the trust cannot still be varied. That is the purpose of the Trust and Settlement Variation Act, to vary trusts when it is of benefit to all parties. The contingent beneficiaries can be protected by providing them with a sum certain of money up front, or payable at a later date, or providing insurance on the beneficiary’s life to protect them in the event of the beneficiary’s death.
There are many possible solutions for a beneficiary who feels disadvantaged by having to wait for his full inheritance. If you are such a beneficiary, you may wish to investigate your alternatives.
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