Legal Question in Wills and Trusts in Canada

Signing over Trust to a third party - risks & stipulations ?

Facts:

Mr. B is the Beneficiary of a Trust

Ms. T is the Trustee

Ms. S is the Settlor of the Trust (deceased)

Mr. B is the sole beneficiary

Mr. B is the son of Ms. S

Mr. B is not married and has no dependents

Mr. C is a potential creditor

Mr. C is an individual, not a corporation

All parties reside in Toronto

The Trust specifies that Mr. B will receive the FULL VALUE of the trust on his 50th birthday (January 1, 2006). The assets in the trust are bonds which accrue a small interest.

Assume that the amount of money that Mr. B will receive from the trust on Jan 1, 2006, is D dollars (i.e., the full amount including all interest accrued).

Situation:

Mr. B currently wishes to obtain funds equivalent to 80% of D dollars as soon as possible (i.e., 2 years before the settlement date). In exchange, he would agree to �sign over� the trust to Mr. C immediately and to pay an additional value of X dollars to Mr. C on the trust settlement date.

The trustee, Ms. T, the creditor, Mr. C, and the beneficiary Mr. B are all in acceptance of Mr. B�s proposal.

Question:

What is involved in �signing over� the trust to the creditor? What risks should Mr. C protect himself against (and stipulate in the contract)?


Asked on 9/05/03, 3:58 am

1 Answer from Attorneys
Robert Maguire Maguire & Company

Re: Signing over Trust to a third party - risks & stipulations ?

Presuming there is absolutely no other beneficiary, you should consult an Ontario trust lawyer about collapsing the trust. Such a course of action is available in BC where I practice. I'm not sure about Ontario.

Otherwise, you can assign your interest in just about anything to another person. The risk to C is if for some reason B loses his right to the trust funds. What does the trust say will happen if B dies before he turns 50?

Any assignment by B to C should include a provision, for what its worth, that B indemnify C for any loss C suffers.

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Answered on 9/11/03, 1:06 pm


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