All About Estates

The Incapable Foreign Beneficiary

If you’re a frequent reader of this blog, then by now it you should know that acting as a trustee comes with a minefield of obligations and duties. Sorry folks, but I’m adding one more to the pile.

The Case

In Galea v. Tybel et al., a trustee of a trust located in Ontario sought to wind up the trust and distribute the funds, held for the benefit of a young adult living in Florida named Tyler. Though a capacity assessment was never undertaken, it was understood that Tyler was incapable of managing his property.

Trouble arose when Tyler’s mother, Teresa, refused to take steps to become Tyler’s guardian of property. Teresa argued that such a step is unnecessary as she has always been Tyler’s caregiver and she cannot be forced to become his guardian of property. At no point was Teresa’s status as Tyler’s caregiver questioned. She simply did not want to take steps to become appointed Tyler’s guardian.

The trust was set up by Tyler’s late father, and when the trustee first advised Teresa of the existence of the trust, he sought evidence of Teresa’s legal guardianship of Tyler. Teresa, instead, began to demand the transfer of the trust proceeds to her personally. Although Teresa purported to act under a power of attorney, there were concerns regarding its validity, given Tyler’s capacity issues.

Given the trustee’s obligations to ensure the trust proceeds are used solely for Tyler’s benefit, the trustee refused to pay the trust funds to Teresa personally, going so far as to hire Florida counsel to provide an expert opinion on the appointment of a guardian of property in the State of Florida. The trustee also had concerns based on a long history of litigation between Teresa and Tyler’s late father.

The Outcome

Ultimately, the court ruled in favour of the trustee, finding that he had acted reasonably in his refusal to release the trust funds to Teresa. Given Teresa’s adamant refusal to have herself appointed guardian of property for Tyler, the court ruled that the trust in Ontario must be wound up, liquidated, and the proceeds used to fund an application to appoint a guardian in Florida.

Final Thoughts

While the case is relatively straightforward, it raises interesting questions when it comes to trusts set up for foreign beneficiaries, especially where the beneficiaries are minors or incapable of managing their property. Florida, though a foreign jurisdiction, is similar enough to Ontario by virtue of having a guardianship system. The case also reminds trustees about the importance of having counsel available in the foreign jurisdiction to provide advice about how that jurisdiction’s laws may affect their ability to fulfill their duties. This is particularly relevant in cases involving foreign minor beneficiaries. Would there be certain situations where a trustee would be obligated to continue administering a trust, even though the time to wind it up has arrived? While each case may be decided differently based on its unique facts, let this be a cautionary tale to trustees to pay attention to the circumstances of each beneficiary.

About Elaine Yu
Elaine obtained her law degree from Osgoode Hall Law School. Elaine articled with the Office of the Public Guardian and Trustee and returned as counsel after she was called to the bar in June 2021. Elaine has represented clients in a wide range of proceedings including dependant’s relief claims, guardianship applications, trust claims, and other estates and trust issues. Elaine is a member of the Association des jurists d’expression française de l’Ontario and is fluent in French.

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