Pour-Over Trust in a Will to protect Minor Children
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A pour-over trust is a legal mechanism within a will that is designed to protect minor children upon the parents' death by funding a trust with assets of the parents' estate for the benefit of their minor children. Given that minor children in Alberta cannot receive their inheritance directly (as per the Wills & Succession Act (Alberta)), and most parents would not want to empower the Office of the Public Trustee to oversee the management of their inheritance, it is essential that a pour-over trust be integrated into the parent's will, such that they might determine how their children's inheritance might be controlled and managed.
The legal mechanism within the will serves to fund a trust that has been designed for the benefit of the parent's minor children, with the trust instrument either forming part of the will (a testamentary trust) or being an independent trust document. The rationale for creating a separate trust document to manage the inheritance of the parents' minor children emanates from the privacy and confidentiality of a separate trust document, as the will is effectively a public document once it has been filed with the court as part of the probate process. Nevertheless, creating a separate trust instrument not only represents a heightened cost from a lawyer's perspective, but as it tends to be an operative revocable trust (a living trust), it imposes numerous demands from the Canada Revenue Agency. And if at least one parent lives to see all their children become adults and not require a trust mechanism to defer the distribution of their estate, the prior creation of an external trust instrument will have proven to be a more costly and administratively time-consuming process that had no practical benefit.
From the perspective of a parent, having the pour-over trust entirely within the will may well provide an added level of security and oversight, given that the Court would have possession of the entire trust structure, which would be accessible to the beneficiaries and better facilitate any subsequent challenge to the trustee's misuse or misappropriation of money that was designated for the children's benefit. Being subject to this level of scrutiny should better constrain trustees from deviating from the explicit terms set out in the will and filed with the Court.
Our law firm can help you plan for the future, including the preparation of a well-drafted will and other estate planning documents, especially where you are looking to protect the interests of your minor children through effective advance planning, as well as dealing with the legal demands associated with the passing of a loved one. We welcome you to contact our law firm today at 403-400-4092 or via email at Chris@NeufeldLegal.com to schedule a confidential initial consultation.
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