Set up an Irrevocable Discretionary Trust with this template trust deed for Canada.
- This form of trust is also called a blind trust, meaning that the beneficiary has no input into, or information about, how the trust is administered, so as to avoid any claims of conflict of interest.
- The settlor (the person setting up the trust) is the sole beneficiary of the trust.
- The division date will occur either upon the death of the beneficiary or on the 21-year anniversary of the establishment of the trust, whichever is earlier.
- The settlor reserves no powers or rights, and shall receive no benefits, income or capital of the trust fund in his/her capacity as settlor.
- The settlor may not act as a trustee.
- During the lifetime of the settlor, no income or capital of the trust shall be distributed to the settlor's spouse or a minor child of the settlor unless such distribution would not result in attribution of income or gain to the settlor for purposes of the Income Tax Act (Canada).
This Canada Irrevocable Discretionary Trust Deed template is provided in MS Word format, and is fully editable to meet your needs.
TRUST AGREEMENT _____________________ DISCRETIONARY TRUST THIS AGREEMENT made effective as of the ___ day of __________, ________. BETWEEN: [TRUSTEE], a corporation incorporated pursuant to the laws of ______________________ (hereinafter the “Trustee”) OF THE FIRST PART - and - [SETTLOR], of the City of __________, in _____________________ (hereinafter the “Settlor” and “Beneficiary”) OF THE SECOND PART WHEREAS the Settlor is desirous of establishing an irrevocable trust to be known as the [BENEFICIARY] DISCRETIONARY TRUST, for the benefit of the Beneficiary and has agreed to transfer or pay over to the Trustee, as hereinafter defined, the property set out in Schedule “A” hereto and may hereafter transfer or pay over or cause to be transferred or paid over to the Trustee further real and personal property which may hereafter be transferred or paid over to the Trustee by persons other than the Settlor, all of which is to be held by the Trustee upon the trusts and with and subject to the powers and provisions hereinafter declared and contained. NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the premises, the sum of ONE DOLLAR ($1.00) paid to the Original Trustee (as hereinafter defined) by the Settlor (the receipt and sufficiency of which is hereby acknowledged) and the mutual covenants and agreements herein contained it is hereby covenanted and agreed by and among the parties hereto as follows: 1. DEFINITIONS In this Trust Agreement, and in any instrument supplemental or ancillary hereto, unless the context otherwise requires, the following words shall have the following meanings respectively: (a) “Accumulating Income” shall have that meaning assigned to it in the Income Tax Act. (b) “Beneficiary” means [BENEFICIARY] in his capacity as Beneficiary and not as Settlor. (c) “Division Date” shall mean the first to occur of the following dates: (i) the death of the Beneficiary; (ii) the date which is one day prior to the twenty-first (21st) anniversary of the execution date of this Trust Agreement; or (iii) such date as the Trustee may in his absolute discretion determine by instrument in writing signed by the Trustee and delivered to the Beneficiary. -2- (d) “Incapacitated Trustee” or “Incapacitated Beneficiary” means a Trustee or Beneficiary under the Trust, as the case may be, who: (i) is declared by Court Order to be incompetent by reason of insanity, mental illness, or mental disability or for whom a legal representative or Committee has been appointed; (ii) is declared bankrupt or insolvent, but only until such time as he is unconditionally and absolutely discharged from bankruptcy or determined not to be insolvent; (iii) makes an assignment or files a proposal in bankruptcy but only until such time as he is absolutely and unconditionally discharged from bankruptcy in the event his proposal fails or until such time as his proposal in bankruptcy has been fully and satisfactorily completed and his debts thereby discharged; (iv) makes an assignment for the general benefit of his creditors or seeks relief or protection from his creditors under any legislation in that regard but only for so long as his property or assets are subject to the claims of such creditors; (v) is, or all or substantially all of whose property is, the subject matter of a receiving order but only for so long as such receiving order shall remain in force and effect; (vi) being a corporation, shall enter into liquidation, compulsory or voluntary, and not being merely a voluntary liquidation for the purposes of amalgamation or reconstruction; or (vii) being a corporation, takes the benefit or files a proposal under the Bankruptcy and Insolvency Act or a plan of arrangement under the Companies Creditors Arrangement Act, or any replacement legislation for or in respect of same. (e) “Income Tax Act” or any reference to a specific provision or specific provisions thereof shall mean the Income Tax Act, as amended from time to time, including any Rules or Regulations passed thereunder, or such provision or provisions, as the case may be, as amended from time to time, or any legislation of the Parliament of Canada from time to time in force of like or similar effect. (f) “Original Trustee” means [TRUSTEE]. (g) “Person” shall mean and include any individual, corporation, partnership, firm, association, organization, foundation, trust, government or governmental authority of any jurisdiction whatever. (h) “Preferred Beneficiary” shall have that meaning assigned to it in the Income Tax Act. (i) “Scheduled Property” shall mean the property specified in Schedule “A” hereto. (j) “Settlor” shall mean [BENEFICIARY] in his capacity as Settlor and not as Beneficiary. (k) “Trust” shall mean the trust known as the [BENEFICIARY] Discretionary Trust established under this Trust Agreement. (l) “Trust Agreement” or “Agreement” shall mean this agreement of trust. (m) “Trust Fund” shall mean the Scheduled Property and any further, substituted or additional property which the Settlor or any other person or persons may donate, sell, assign, transfer, -3- appoint or vest in the Trustee to be held upon the trusts and with and subject to the powers and provisions hereof and any property substituted therefor, and property into which the aforesaid property may be converted, together with all capital accretions to and all income from such property; and any property acquired by the Trustee pursuant to the terms hereof but excluding all amounts which have been paid or distributed therefrom (whether out of capital or income) in the normal course of administration of the Trust pursuant to the provisions of this Trust Agreement. (n) “Trustee” shall mean and include the Original Trustee as well as any successors thereto, appointed in accordance with the provisions hereof. 2. INTERPRETATION 2.1 In this Trust Agreement any personal pronoun relating to the Trustee for the time being, or to the Settlor, or to a Beneficiary shall be read and construed as the gender and number of the party or parties referred to as the particular instance may require. 2.2 Words importing the singular number only shall include the plural and vice versa. Words importing the masculine gender shall include the feminine gender. Words importing individuals shall include firms and corporations, and vice versa. 2.3 In the event that there is only one Trustee, then any reference to one or more trustees shall be read and construed as meaning that Trustee. In the event that there is more than one Trustee, a reference to one Trustee shall be read and construed as meaning all such Trustees. 3. ESTABLISHMENT OF TRUST 3.1 The Settlor hereby donates, transfers and delivers to the Trustee the Scheduled Property, which property shall form part of the Trust Fund. 3.2 The Settlor directs and the Trustee covenants and agrees that the Trust Fund shall be held upon the trusts and subject to the powers and provisions herein contained. 3.3 The Trustee shall have the authority (exercisable in his unfettered discretion) at any time during the continuance of the Trust hereby created to accept such additional property (real or personal) which the Settlor or any other person or persons may hereafter transfer to the Trustee, either personally or by testamentary act or disposition. 3.4 If any of such further or additional property is so donated, transferred or delivered to or is vested in the trust hereby created, subject to the obligation of the Trustee to fulfill any conditions attached thereto, then the Trustee shall upon acceptance of such property comply with such condition. Reservation of Power 3.5 Subject to paragraph 3.6 hereof the Settlor hereby reserves no powers or rights or benefits hereunder and the Settlor shall receive no benefits of any nature or kind whatever and without restricting the generality of the foregoing, the Settlor shall not be entitled to receive any income or capital of the Trust Fund at any time, and any and all provisions of this Trust Agreement shall always be construed so as to exclude any possibility of any benefit of any nature or kind whatsoever accruing to the Settlor. -4- 3.6 The Settlor may not be a Trustee, but may at any time on thirty (30) days advance notice terminate and replace one or more of the Trustees in accordance with the terms of this Agreement. 3.7 For greater certainty, the Trust Agreement shall at all times be construed as follows: (a) except to the extent of any payment of principal or interest on any loans made by the Trustee on behalf of the Trust, no portion of the Trust Fund shall at any time revert to the Settlor (in his capacity as Settlor) or to any other person from whom property or substitutions therefor was directly or indirectly received; (b) no portion of the Trust Fund shall at any time pass to any person or persons determined by the Settlor subsequent to the creation of the Trust; (c) the consent of the Settlor shall not be required on any disposition of any portion of the Trust Fund; (d) no property forming any part of the Trust Fund shall be held on condition that, during the lifetime of the person from whom the property or substitutions therefor was directly or indirectly received, the property shall not be disposed of except with the consent or in accordance with the direction of the Settlor; (e) no amount, whether in respect of income or capital, shall, during the lifetime of the Settlor, be distributed, allocated or otherwise designated to or in respect of a beneficiary who is a spouse of the Settlor or a minor unless such distribution, allocation or designation would not result in attribution of any income or gain to the Settlor for the purposes of the Income Tax Act; (f) in the event of any conflict between the provisions of this Article 3 and any other provision or provisions of this Trust Agreement, then the provisions of this paragraph shall supersede such other provision or provisions. Trust Irrevocable 3.8 It is declared that this Trust is irrevocable and that the Settlor in his personal capacity or in his capacity as Settlor, is divested of any power whatsoever to revoke this Trust. Name of Trust 3.9 This Trust shall be known and designated, where convenient, as the [BENEFICIARY] Discretionary Trust and the Trustee may, in his discretion, in that name hold title to or ownership of any or all of the property from time to time forming part or all of the Trust Fund, carry out any transactions on behalf of the Trust and enter into any contracts or arrangements or otherwise exercise any of the powers, discretions and authorities hereunder conferred upon him. Decisions by Trustees 3.10 In the event that there is more than one Trustee, all decisions respecting the Trust, and the exercise of any of the powers and authorities of the Trustees or any discretion permitted to be exercised hereunder shall require a simple majority decision of the Trustees. -5- 3.11 The fact that a Trustee is interested financially or otherwise in the result of any exercise of a discretion vested in the Trustee shall not prevent him from the real exercise of such discretion and every benefit received by a Trustee shall not be in lieu of any compensation to which the Trustee may be entitled for acting as Trustee. Residence 3.12 The Trust shall for the purposes of the Income Tax Act be resident only in ___________. 4. DISTRIBUTION OF TRUST FUND 4.1 Until the Division Date, the Trustee may pay and apply the whole or such part or parts of the income and capital of the Trust Fund as the Trustee shall from time to time in his absolute discretion determine, to or for the benefit of the Beneficiary at such time or times, in such manner, in such amounts and in such shares or proportions as the Trustee shall in his absolute discretion from time to time determine advisable for any reason, including without limiting the generality of the foregoing for the maintenance, education, entertainment, advancement, welfare, support, comfort, benefit or well being of the Beneficiary. Any income not so paid or applied as aforesaid in any fiscal period shall be accumulated and added to the capital of the Trust Fund and treated as part thereof. 4.2 Until and at the Division Date, for the purpose of ensuring that taxable capital gains (as defined in the Income Tax Act) required to be paid by the Trust shall be kept to a minimum, but without in any way limiting any discretion conferred upon the Trustee by this Agreement, the Trustee is hereby authorized and empowered: (a) to make any division of the Trust hereby created and to set aside, pay or distribute any share or interest therein either in whole or in part in the properties forming part of the Trust Fund at the time of such division, setting aside, payment or distribution; (b) in making any such division, setting aside, payment or distribution, to establish the fair market value of any of such properties in such manner as he may, in his absolute discretion, deem most equitable; provided that if the Trustee deems it to be appropriate, such valuation may reflect all or any portion of any taxable capital gain or allowable capital loss (as defined by the Income Tax Act, respectively) which would be included in the computation of income or which would be allowed as a deduction from income of the Beneficiary if the Beneficiary had, being the sole owner thereof, disposed of such asset immediately following such division, setting aside, payment or distribution. Each and every fair market value established by the Trustee as aforesaid shall be conclusive and binding upon all persons concerned. 4.3 Until and at the Division Date, in making, from time to time and at any time or times, any payment or transfer to, or in applying any amount to or for the benefit of the Beneficiary, the Trustee is hereby authorized and empowered to make such payment or transfer, or to apply such amounts, to any one or more of the following persons: (a) directly to the Beneficiary; (b) directly in payment of the expense, support, entertainment, maintenance, advancement, betterment, schooling, development, medical, surgical, hospital or other institutional care of the Beneficiary (notwithstanding that the Beneficiary’s parent or parents may also be liable for the support and maintenance of the Beneficiary); -6- (c) to the natural guardian (being the male parent if alive, or the female parent if the male parent is deceased) or legal guardian of the Beneficiary; (d) to any other person, whether or not appointed guardian of the Beneficiary, who shall have the care and custody of the Beneficiary. 4.4 The Trustee shall not be under any duty to see to the application of funds so paid and the receipt by the recipient of such payment shall be a full and sufficient discharge to the Trustee provided further that such payment whether it constitutes income or capital may be made in cash, kind or specie in the absolute discretion of the Trustee. 4.5 At the Division Date the Trustee shall divide and transfer the Trust Fund among one or more of the following, in the absolute discretion of the Trustee: (a) to or for the benefit of the Beneficiary; (b) if as at the Division Date there is no Beneficiary then alive then, and only then, to or for the benefit of such person or persons who at law are entitled to inherit or receive a share of the net value (i.e. the value of the estate after payment of the charges thereon and the debts, funeral expenses, expenses of administration, estate tax and succession duty) of the estate of any or all of the deceased Beneficiary, in such shares or portions, even to the exclusion of any one or more of such persons, as the Trustee in his absolute discretion determines; or (c) one or more charitable foundations or organizations registered as such pursuant to the Income Tax Act. 4.6 Notwithstanding anything herein contained, the Beneficiary shall not be entitled to any portion of the Trust Fund during any period of time the Beneficiary is an Incapacitated Beneficiary and no part of the Trust Fund shall be distributed to an Incapacitated Beneficiary by the Trustee at any time during which, and for so long as, such Beneficiary is an Incapacitated Beneficiary. The Trustee shall not, however, in any way be liable to any other Beneficiary or any other person for any distribution of the Trust Fund to an Incapacitated Beneficiary which occurs prior to the Trustee obtaining notice that a Beneficiary is an Incapacitated Beneficiary. The prohibition upon an Incapacitated Beneficiary receiving any portion of the Trust Fund, and upon the Trustee distributing any portion of the Trust Fund to an Incapacitated Beneficiary, shall apply only for so long as such Beneficiary is and continues to be an Incapacitated Beneficiary. PROVIDED, HOWEVER that the Trustee may at his or her unfettered discretion pay to the legal representative or committee of an Incapacitated Beneficiary such sum or sums, from time to time and at any time at the sole discretion of the Trustee, for the maintenance, education, entertainment, advancement, welfare, support, comfort, benefit or well-being of such Incapacitated Beneficiary. 5. POWERS AND DUTIES OF TRUSTEES Limitation of Power to Invest 5.1 Notwithstanding anything to the contrary contained herein, the Trustee’s powers to hold and invest the Trust Fund shall be limited to the following: -7- (a) the kinds of investments which may be or become the subject of the Trust Fund shall consist only of bonds, treasury bills, or similar investments with the highest investment grade rating or otherwise guaranteed by the Government of ___________ or a State/Province of ___________ including bonds issued by Crown Corporations; or in Guaranteed Investment Certificates issued by a Chartered Bank of ___________ but only to the limit insured by the Canadian Deposit Insurance Corporation, or in cash but only in such sums as may not otherwise reasonably be invested in Guaranteed Investment Certificates, bonds, Treasury Bills or similar investments; and (b) the value of the Trust Fund shall not exceed _____________ Dollars ($_________) or such other maximum limit as may be set from time to time by the Government of __________ or any other government, body or authority having jurisdiction over the Beneficiary, to permit the Beneficiary to receive the highest possible income support by reason of mental or physical disability. If the Trust Fund shall at any time exceed _______________ Dollars ($________) or such other maximum limit, the Trustee shall distribute such amount of the Trust Fund to the Beneficiary so as to reduce the capital amount of the Trust Fund to such maximum limit. Widest Latitude and Discretion 5.2 The term “powers” as used in this Article 5, shall be deemed to mean and include those things which the Trustee may, in his sole and absolute discretion, do or refrain from doing in the management, supervision and carrying out of this Trust. Any power specifically expressed herein shall be deemed to be in addition to all inherent powers which the Trustee otherwise would have by law, and shall be in addition to any powers necessarily or reasonably implied from the terms of this Trust Agreement. 5.3 The Settlor hereby states and declares that it is his intention that in the management, operation, administration and carrying out of the terms of this Trust, but subject to the restriction on the Trustee’s investment powers as described in paragraph 5.1 hereof, the Trustee is to have the widest possible latitude and discretion. All powers, authorities, discretions or duties conferred or imposed upon the Trustee whether by the terms of this Trust Agreement (expressed or implied) or by any statute, or general law, shall be exercisable or shall be performed by the Trustee in his sole and absolute unfettered and uncontrolled discretion. For greater certainty, but without being limited in any way thereby, the Trustee shall have and is hereby given the powers and authorities in his absolute and uncontrolled discretion at any time and from time to time to administer this Trust and the Trust Fund, and shall have the right to take any action in connection therewith, and to exercise any rights, powers and privileges in connection therewith that a natural person would have in the ownership, investment, management, supervision and administration of his own properties. Powers not Exhausted 5.4 No single exercise of any power or authority of the Trustee and no one performance or non- performance of any duty shall be taken to exhaust any such power or authority or to be a complete performance of any such duty if a continued performance or exercise thereof shall be necessary, desirable or requisite in the sole and unfettered discretion of the Trustee. -8- Specific Powers 5.5 In order to remove any doubts, and for the sake of greater clarity and certainty, but without in any way limiting the generality and broadness of the powers hereinbefore or hereinafter elsewhere in this Trust Agreement conferred upon the Trustee, then in addition to all other powers vested in the Trustee by law and not limited by law or otherwise, the Trustee shall have from time to time and at any time or times the specific powers, discretions and authorities as follows: (a) for all purposes the Trustee may from time to time determine whether money coming into his hands is capital or income, and may apportion blended funds and every determination of apportionment made by the Trustee expressly or by implication shall be final and binding upon all persons who may be entitled to any interest in the Trust Fund hereunder; (b) as among the type of investments to which the Trustee is limited, to sell, transfer, assign, exchange, convey, pledge, mortgage, lease, grant options with respect to or otherwise dispose of the whole or any part of the Trust Fund, in such manner and upon such terms and conditions as the Trustee shall, in his unfettered discretion, determine advisable; (c) to purchase annuities for the Beneficiary and to select such type of annuity and mode of payment therefor as the Trustee may deem advisable; (d) to institute and defend proceedings at law and to proceed to the final determination thereof or compromise the same as the Trustee shall consider advisable; (e) to engage in any transactions authorized or empowered whether expressed or implied hereunder with any Trustee hereof, the Settlor or the Beneficiary, persons related thereto including corporations in which they or related persons are interested provided that such transactions are in the unanimous opinion of the disinterested Trustees or Trustee on the same basis as might reasonably be negotiated with any person dealing at arm’s length with the Trust (within the meaning of the Income Tax Act); (f) in respect of any such taxes which may, from time to time, be payable, to charge against capital those taxes which appropriately are payable out of capital and against income those which appropriately are payable out of income. In case of doubt as to whether a given tax should be paid out of capital or income or apportioned between them, the Trustee shall be entitled to rely and act upon the opinion of any chartered accountant or solicitor and in so doing, such decision shall be conclusive and binding upon all interested parties; (g) to pay and discharge from and out of the income or capital of the Trust Fund, all liabilities, obligations, debts, expenses or other charges properly incurred in respect of the administration of the Trust; (h) to accumulate the income of the Trust and to add same to the capital of the Trust Fund; -9- (i) to open and operate such account or accounts as may be expedient in the opinion of the Trustee in any chartered bank, trust company or other financial institution, and for the purposes of the Trust, to draw, make, endorse, deposit or deal in any mercantile, commercial or security document
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