Terminating Family Trusts

September 30, 2015

From time to time we are asked whether it is possible for the Beneficiaries of a Testamentary Trust or Family Trust to terminate the Testamentary Trust or Family Trust despite the Testator’s or Settlor’s original intentions.

To answer this question we need to consider the rule that comes to us from an English case called Saunders v. Vautier and has since been adopted in Canada.  This rule essentially says that if all the beneficiaries of a trust are of the age of majority and of sound mind (ie. sui juris) the trust may be terminated if it all of the beneficiaries desire to do so.

Naturally, this rule has evolved over time and become more complicated in the process.  In Ontario, the expansion of the rule has been considered in a number of recent Ontario Superior Court of Justice decisions.  As a consequence, we can now say that in certain situations where all beneficiaries have an interest in the assets of the Trust it may be possible to terminate the Family Trust.  However, it is still possible for an original Settlor or Testator to protect the Trust by ensuring that there are contingent gifts so that the full beneficial interest of the Trust cannot be accounted for.

It goes without saying that this is a complicated area beyond the scope of this blog.  If you are a beneficiary of a trust interested in exploring whether your trust may terminated prematurely feel free to speak with one of our professionals at one of our Ottawa, Kanata, or Barrhaven locations.  You should also feel free to telephone us at 613.440.4888 or feel free to email us at  our general email address located on our website at www.conductlaw.com.

JP McAvoy is a Corporate and Commercial lawyer at Conductlaw.  He frequently advises clients on a range of corporate and tax issues, including trusts and estates matters.