What does it take to make an Alberta trust “work” in light of Fundy Settlement v Canada, 2012 SCC 14? From Colin Poon, “Interprovincial Tax Planning Using Trusts Upheld”, Canadian Tax Focus 5:3 (August 2015) re Discovery Trust v Canada (National Revenue), 2015 CanLII 34016 (NL SCTD):
The CRA’s position paper supporting the reassessment viewed the trustee as passive: “The only function(s) that [the trustee] engaged in for Discovery Trust was administrative in nature and mostly limited to the signing of documents” (paragraph 25). Indeed, the trustee generally accommodated requests made by the beneficiaries and their representatives. However, the court’s analysis of several material transactions showed that the trustee always conducted its own analysis of whether the transactions requested by the beneficiaries would in fact benefit them. Legal issues in implementing transactions were identified, and amendments were suggested (for example, those noted at paragraph 34). The trustee obtained sufficient background information to make an informed decision.
In the court’s view, as long as these processes are carried out, acquiescing to requests from beneficiaries does not amount to delegation of management and control. Different views (between the trustee and the beneficiaries) “can co-exist, even be in conflict as independent positions, without engaging in a diminution of the Trustee’s authority” (paragraph 47). Thus, trustees may receive and grant requests by beneficiaries in respect of transactions involving trust property without tainting the residence of the trust as long as proper processes are in place to ensure that the trustees fulfill their obligations under the trust deed.
