All About Estates

Considerations When Trustees are Involved in Transactions

Approaching year end, you increasingly may be fielding calls from corporate lawyer peers who are closing transactions in which trusts are involved. For example, trusts may be direct vendors or sellers, or, perhaps HoldCos are the sellers, but one or more trusts own the shares of the HoldCos.  This blog will explore some (but not all) considerations that are relevant when trusts are involved in a transaction.

  1. High Level Considerations

In my view, the most important place to start is to go back to basic principles, remembering that a trust is a relationship, and not a legal entity, like a corporation.  When people discuss trusts or use wording in corporate documents that suggest a trust is a legal entity, that is not technically accurate. As such, trusts in and of themselves cannot be a party to a transaction because they cannot contract. It is the trustees who enter into any agreement, lease, financial commitment, or other documentation that involves property subject to a trust. Similarly, a trust cannot technically be a registered shareholder.  Only trustees can be registered shareholders.

  1. Due Diligence

When a trustee is a party to a transaction, it is important to conduct due diligence to avoid “participation in breach of trust” and thereby to help ensure a legally binding transaction.

Necessary due diligence may include, but not be limited to:

  • Determining if the trust has been created and validly exists pursuant to the relevant jurisdiction;
  • Checking the terms of the trust deed and relevant legislation to determine if the trustees have been validly appointed;
  • Checking if title to the property in question is validly held by the trustees;
  • Reviewing the trust deed to determine the powers of the trustee. The relevant trustee act should also be consulted to determine if the trustee has powers that may apply unless the trust deed indicates otherwise. This will help to determine whether the trustee has the power to enter into the transaction; and
  • Reviewing the trustee resolution to determine that the trustees have resolved to take all necessary steps to enter into the transaction and/or to execute the relevant documentation.
  1. Drafting Considerations

As it is the trustees who are entering into an agreement as trustees of a trust, you may want to consider the wording of the trustees as a party to the transaction. Considerations include (imagine that I am the trustee of the 2022 Silverbrook Family Trust):

  1. “The trustees of the 2022 Silverbrook Family Trust from time to time” – This wording may seem preferable as it covers a change in trustees; however, there is no certainty provided in that wording and third parties may ask for some form of documentation to prove the proper trustees at the relevant time; and
  2. “Tamar Silverbrook, trustee of the 2022 Silverbrook Family Trust”

The first reference to the trust in a document should be the full name as it is defined in the trust deed. If the trust is then a defined term, later references can use the defined term rather than the full name of the trust.

On the topic of wording choices, signature blocks also should be considered. The document may say “DATED the 13th day of May, 2022.    _____________”. Presumably, signatures will go on top of that line. Under that line, consider how to reference the trustees, who are party to the transaction as trustees of the trust. Considerations include:

  1. “Tamar Silverbrook, Trustee” – If “Trustee” is a defined term in the document, following the signatory’s name, you can use capital “T” trustee in the signature block;
  2. “Tamar Silverbrook, trustee of the 2022 Silverbrook Family Trust” – If “trustee” is not a defined term in the document, use lower case “t” for “trustee”;
  3. “Tamar Silverbrook, trustee of the Silverbrook Trust” – this may cover an instance where “trustee” is not a defined term in the document, however the 2022 Silverbrook Family Trust has been defined as the “Silverbrook Trust” in the document; and
  4. “Tamar Silverbrook, as trustee of the Silverbrook Trust and not in her personal capacity” if you want it to be clear that Tamar is only signing in her capacity as trustee in circumstances where trustee is not a defined term. If “trustee” is not a defined term in the document and the signatory is in fact also signing in a personal capacity, following the signatory’s name consider including “in his/her/their personal capacity and as trustee of the X Trust”. In this example, “Silverbrook Trust” would have been a defined term somewhere in the document.

You may be thinking, if we list the trustees by name, what happens when the trustees change? Depending on the document, you may want to consider updating it at the relevant time (for example, you may consider updating shareholders’ registers).

As you can see, additional considerations may be necessary and departures from “customary” corporate documentation may be required when a trust is involved in a transaction. Involvement of a trust expert early on in the transaction has merit, as undoubtedly adjusting the documentation to reflect the involvement of a trust will take time.


About Tamar Silverbrook
Tamar Silverbrook is an associate in the Trusts, Wills, Estates and Charities group at Fasken. Tamar’s practice is focused on domestic and international trusts, as well as wills and estate planning. Tamar works closely with clients and/or clients’ advisors to draft the appropriate documents to facilitate estate and business succession plans that fulfill clients’ unique objectives. This includes providing advice on probate planning, disability planning, charitable gifting, asset protection strategies, cross-border estates and tax issues, personal privacy, family law matters and the interpretation of trusts’ provisions and the corresponding scope of authority provided to trustees. Tamar also advises trustees in administrating a range of complex trust matters.

1 Comment

  1. Michael Lazarus

    September 6, 2023 - 12:35 am

    I came across this article while searching for confirmation of my understanding of how a document/agreement to which a trust is a party should properly be executed on behalf of the trust. This article confirms my understanding. Interestingly, I was not readily able to find other articles or posts dealing with this subject; rather, I came across several that totally ignored that a trust is not a legally recognized entity. I get resistance from other lawyers when I write, for example, “The Trustee of the x Family Trust ” rather than “The x Family Trust by its Trustee “. Thanks Tamar !! I will show your article next time I have resistance. The vast majority of lawyers are not aware of the points that you have made. Note that I am the only one to enter a comment so far. I wonder whether there is any caselaw that turns on this point or if it’s overly academic !?

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