Written on May 29, 2015 – 7:45 am | by Paul Fensom
Now that it is finally spring it has been is a great time to take my dog, Bailey, out for long walks. Some of the cemeteries in Toronto are great for this purpose. However, during my last walk there was nowhere to sit down for a brief rest which got me to thinking of the following problem. Of the following three possibilities, which scenario would be problematic? A trust to:
• maintain my dog in the style to which he has become accustomed,
• maintain my cemetery plot in perpetuity
• ensure funds will always be available to provide a place to relax in a park, like a park bench
This question faces two main obstacles in trust law. First, let me highlight some of the important facts about trusts. All formal trust accounts must have a Trustee(s), Trust property and Trust objects (the object of the Trust is the purpose or the beneficiary).
The terms of the Will or Trust agreement will establish the duties of the Trustee. The beneficiary(s) has rights to ensure the trust objects are carried out. In most cases the beneficiary(s) is a person or legal entity. This raises the first obstacle with respect to my three possible scenarios. Where the purpose does not involve a person or legal entity (maintaining my dog, maintaining my cemetery plot or providing a place to relax), who will ensure the trust objects are being carried out? Although Bailey’s a super-smart dog, I doubt he has the wherewithal to ensure his trust is being properly administered.
Fortunately, the law has identified a few exceptions to this lack of enforceability obstacle. Trusts for specific animals or pets, cemetery plot maintenance and charitable purpose trusts can indeed be valid. Enforceability of cemetery trusts and charitable purpose trusts is done by one or more branches of government.
The other obstacle to consider is the perpetuity rule. This rule (still applicable in Ontario and several other provinces) requires that a trust be terminated or distributed prior to 21 years beyond a life. If there is no specific person or legal entity named as a beneficiary in the subject trust then this rule, when applied, will require my trustee to distribute all the assets in trust to a person(s) or legal entity within the applicable time frame. The cemetery plot and a place for relaxation could very well be around for much longer than this. Again, there are some exceptions, most notably for cemetery maintenance trusts and charitable purpose trusts. I should note the difference between charitable purpose trusts and a non-charitable purpose trusts. A charitable purpose trust is a trust established for the benefit of a charity which is defined by legislation. Any non-charitable purpose like a social club or sports club and potentially my park bench does not enjoy the exemption from the perpetuity rule.
Therefore the answer to the question about which of the 3 scenarios would likely fail to be a proper trust is the maintenance of a park bench in perpetuity. At best, in Ontario, the park bench could be maintained for 21 years. This is not true in all jurisdictions and some progressive strides have been made to allow some types of non-charitable purpose trusts that could fund social or sports clubs, as an example.