A Reminder of the Rules for Investing


Written on September 15, 2014 – 9:20 am | by Katie Ionson

The judgment in Miles v. Vince[1] was issued recently by the British Columbia Court of Appeal and is a reminder of the strict duties trustees face in selecting investments.

The case centred around the investments of two trusts, referred to in the judgment as the Family Trust and the Insurance Trust. The Family Trust was established by the deceased before his death and held shares in three private companies, each of which held properties (the “Main Street Properties”). The Insurance Trust was established on the deceased’s death and held $2 million in life insurance proceeds. Both trusts were discretionary trusts which gave the trustee “absolute discretion” to invest the trust property. The deceased’s wife and three children were the income and capital beneficiaries of the Insurance Trust during its term and the three children were the beneficiaries on the trust’s termination. The three children were the income, capital and termination date beneficiaries of the Family Trust. The trustee for both was the deceased’s sister.

The sister argued that the deceased had told her that his intention in settling the Family Trust and the Insurance Trust was to develop Main Street Properties. In furtherance of this goal,  the sister arranged a loan of $1,170,000 from the Insurance Trust to the Family Trust (the “Loan”), with interest at 10% per annum, payable monthly. However, although interest accrued, it was never actually paid. Additional financing was also obtained from an outside source. The Loan was lower in priority to the additional financing and, around the time the Loan was made, the value of the Loan and additional financing was greater than the value of the Main Street Properties.

The Court of Appeal ultimately found that the Loan was an imprudent investment and a breach of the sister’s duties as trustee of the Insurance Trust. It was incumbent on the sister to consider the interests of all the beneficiaries of the Insurance Trust in investing its assets, including the wife’s interest as an income beneficiary. In advancing the Loan for property development, the sister did not act impartially as between the income and capital beneficiaries of the Insurance Trust. The Court of Appeal disagreed with the sister that the deceased’s intention in establishing the Insurance Trust was to develop the Main Street Properties, finding that the existence of separate trusts suggested different purposes. It also found that Loan placed the sister in a conflict of interest. For example, the decision to enforce repayment of the Loan would be in the best interests of the Insurance Trust beneficiaries but not the Family Trust beneficiaries.

The case is a reminder of the strict duties trustees face in making investments. Settlors wishing to displace these duties should do so as explicitly as possible; the granting of an “absolute discretion” to distribute or invest trust assets is unlikely to be sufficient. It is also a reminder that even with a discretionary trust, there is a duty to consider the interests of the income and capital beneficiaries. This is the case even where their identities overlap, as here where the wife and children were both income and capital discretionary beneficiaries.


[1] 2014 BCCA 289.

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    Unpaid Caregivers. Worth their time in GOLD


    Written on September 12, 2014 – 6:07 am | by Audrey Miller

    Labour Day is a back to school time and for me this translates into the time to start new projects and a time to take stock of current events so as to be able to plan ahead with anticipation. The September 1, 2014 Globe and Mail Editorial and Comment page provided three very interesting essays. The first essay is on Mortality written by Konrad Yakubuski and discusses ‘the right to die with dignity’. The second essay is on Caregiving and the third essay is on Back To School, written by Elizabeth Renzetti. While all three are well written and thought provoking articles, it is the Caregiving essay by Sherri Torjman, titled ‘An informal but essential work force’ that particularly relates to the Labour Day, back to school/work theme.

    According to results of the General Social Survey, Portrait of caregivers, 2012, released in September 2013, nearly 46% of Canadians aged 15 and older or 13 million Canadians have provided care to a family member or friend with long-term health needs. This report found that overall, caregivers spent a median of 3 hours a week. Spouses spent the greatest amount of time, looking after their spouse, with a median of 14 hours weekly.

    From the 2012 statistics, 60% of caregivers were working at a paid job as well. Of the 81% of caregivers with children living at home under the age of 18, the average median age was 41 years. The Sandwich Generation has been aptly named. The consequences felt by the employed carer include 15% reducing their work hours to accommodate life’s other needs (their family) causing a reduction in take home pay and employee benefits as well as 1% turning down promotions or other opportunities such as travel.
    More than one in four Canadians reported providing care to a family member or friend. Look around;you likely know these caregivers.

    I have attached a link to a video on balancing caregiving and work. There is assistance available. Speak to your human resource department and ask them what they are doing to assist you. Caregiving is a matter of time, you may not be there now, but you will be. As Ms. Torjman concluded: “On Labour Day, we need to pay attention to this huge group of essential workers; the millions of informal caregivers who show up nowhere in the employment numbers, but figure so prominently in real life.”
    -Audrey Miller

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      Changes to the Rules of Professional Conduct


      Written on September 11, 2014 – 8:58 am | by Jasmine Sweatman

      On October 1 the new Rules of Professional Conduct come into effect. As well as rule changes affecting the practice of law generally, there are also specific rule changes relevant to lawyers practising estates and trusts.

      The new rule 3.4-37 requires a lawyer who drafts a will containing a clause requiring the drafting lawyer to be retained by the trustees to assist with the administration to provide the trustees with written advice the clause is a non-binding direction. The second new rule, 3.4-38, prohibits a lawyer from preparing an instrument giving the lawyer or an associate a gift or benefit from the client, including a testamentary gift, except in cases where the clients are family members of the lawyer or of the lawyer’s partner or associate.

      The question this raises is: were these rule changes really necessary? I am not sure that there really was a problem of lawyers drafting wills for clients who were not family members and making themselves a beneficiary. Yes it has happened but of all the changes that could have been made was something as self-evident as this necessary?

      As a profession some would argue we have a public perception problem generally.  A change like this does not really enhance that public perception.

      When the Rules of Professional Conduct change, sometimes I do wonder what it is that drives the change.

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