CANADA TRUSTEE: A COMPREHENSIVE GUIDE TO THE VARIOUS TYPES AND ROLES

Canada trustee

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Canada Trustee Introduction

As a Licensed Insolvency Trustee and Estate Trustee in Greater Toronto Ontario, Canada area, I have the honour of assisting individuals and families during some of the most challenging periods of their lives. Whether addressing personal bankruptcy, facilitating corporate restructuring, or managing the administration of a loved one’s estate, my role as a Canada Trustee is to offer services to individuals and businesses with debt problems through professional guidance, support, and expertise. My objective is to help clients navigate these complexities, achieve their goals, and confidently move forward.

But despite the importance of professional trustees in these situations, many people are unclear about what a licensed trustee does, trustee duties or the different types of trustees in Canada. Many Canadians are unaware of the role of a Licensed Insolvency Trustee, or that they may need one in the event of financial difficulties.

In this comprehensive guide, we’ll explore the various types of Canada trustees, including Licensed Insolvency Trustees (formerly called bankruptcy trustees), Estate Trustees, and others. We’ll delve into the roles and responsibilities of each, and provide examples of the types of cases they handle. Whether you’re an individual seeking guidance on personal bankruptcy, a business owner facing financial difficulties, or a grieving family trying to navigate the complexities of estate administration, this guide is designed to provide you with a clear understanding of the different types of trustees and their roles in the Canadian legal system.

A Brief Overview of the Role of a Canada Trustee

A Canada trustee is a qualified professional tasked with the management and administration of assets on behalf of individuals or entities that are unable to oversee their financial affairs. This role encompasses a variety of situations, including assisting individuals facing financial difficulties who seek to eliminate and restructure their debts through one of the available debt relief options such as a consumer proposal or bankruptcy. Additionally, Canada trustees may manage the estates of deceased persons or oversee the winding up of companies.

The role of a Canada trustee is to serve as an impartial third party responsible for the following duties:

• Managing the assets of the individual or entity.
• Distributing assets following the terms outlined in a court order from a legal process or agreement.
• Ensuring that all debts and obligations are settled in compliance with applicable laws.
• Offering guidance and support to the individual or entity to assist them in achieving their objectives.

  

Importance of Understanding The Different Types and Responsibilities of Canada Trustees

There are different types of Canada trustees, the main ones being:

1. Licensed Insolvency Trustee (LIT): A LIT is a professional specializing in bankruptcy and insolvency matters. A LIT is licensed by the Canadian government and is the only professional authorized to administer bankruptcies, proposals, and receiverships in Canada.
2. Estate Trustee: An Estate Trustee, sometimes referred to as an Executor or Executrix, is an individual, firm, or trust company designated to oversee the estate of someone who has passed away. This role can be assigned through a will or for a complicated estate where there is no will or the named estate trustee does not wish to act, they can be appointed by a court. The Estate Trustee’s main responsibility is to manage the estate’s assets and ensure they are distributed according to the deceased person’s wishes outlined in the will or, if there is no will, according to the laws governing inheritance.
3. Trustee for Children: A Trustee for Children is a professional who manages the assets of a minor child, usually in the context of trust funds or an estate.
4. Office of the Public Guardian and Trustee (PGT): A Trustee for the PGT is responsible for managing the assets and affairs of individuals who cannot manage their affairs, such as those with mental or physical disabilities.
5. Corporate trustees: A corporate trustee in Canada plays a crucial role in managing and administering trusts, ensuring that the trust’s objectives are met, and the beneficiaries’ interests are protected. The role and responsibilities of a corporate trustee in Canada typically include trust administration, investment management, tax compliance and beneficiary relations and management.

Qualifications for Canada Trustees

Licensed Insolvency Trustee

The Office of the Superintendent of Bankruptcy Canada (OSB) possesses the sole authority to issue licenses to Licensed Insolvency Trustees under the Bankruptcy and Insolvency Act (Canada) (BIA). Before granting a license, the Superintendent must ensure that candidates fulfill specific qualifications as outlined in the OSB’s Directive No. 13R8, Trustee Licensing.

Candidates must, for instance:

• Demonstrate good character and reputation.
• Maintain solvency.
• Complete the Chartered Insolvency and Restructuring Professional (CIRP) Qualification Program (CQP), as well as the CIRP National Insolvency Exam and either the Insolvency Counsellor’s Qualification Course or the Practical Course on Insolvency Counselling.
• Pass an Oral Board Examination.

The OSB is a federal government agency so the licensing is therefore a federal matter.

Estate Trustee

In Canada, Estate Trustees who are appointed to manage the estates of deceased persons fall under the jurisdiction of the provinces and territories. The qualifications for an Estate Trustee in Canada vary depending on the province or territory, but generally, an individual should have the following qualifications:

1. • Be at least 18 years old, as per the laws of the province or territory.
   • Have the mental capacity to manage the estate, as determined by a court or a medical professional.
   • Be a resident of the province or territory where the estate is located, or have a connection to the estate or the deceased.
   • Be a person of good character, integrity, and reputation.
   • Have some knowledge of estate administration, inheritance, and probate law.
   • Have experience in managing finances, accounting, or business, which can be beneficial in managing the estate.
   • Be able to manage the estate’s assets, debts, and liabilities.
   • Be able to prepare and file tax returns, as required.
   • Be able to resolve disputes and conflicts that may arise during the estate administration process.
   • Be able to maintain confidentiality and professional discretion when dealing with sensitive information.

When we act as Estate Trustees, we seek court approval for our appointment.

Note that some provinces or territories may have additional or different requirements for Estate Trustees. It is essential to check the specific laws and regulations in the province or territory where the estate is located.

Trustee for Children

If someone is going to be a Trustee for Children, there are certain qualifications and requirements they must meet. In Canada, a Trustee for Children is typically a person appointed to manage a trust that benefits children, such as a testamentary trust or a living trust. As a Trustee for Children operates under provincial law, like an Estate Trustee, the qualifications may vary depending on the province or territory.

Generally, the qualifications to act as a Trustee for Children are just like that of an Estate Trustee.

Office of the Public Guardian and Trustee (PGT)

The PGT is licensed and registered with their respective provincial government, and its staff are authorized to act as Public Guardians and Trustees. The PGT is a provincial government agency that provides protection and support to vulnerable individuals, including those with cognitive impairments, mental health issues, or other disabilities.

Staff members have experience working in the fields of law, finance, social work, or healthcare. Some staff members have experience working with vulnerable populations, such as seniors, individuals with disabilities, or those with mental health issues. The PGT staff also have university and other professional designations as well as experience to allow them to oversee their work.

If there is insufficient staff to handle a certain aspect of PGT work, they can outsource it to a law firm or accounting firm.

Corporate trustees

A corporate trustee in Canada is subject to provincial laws and supervision. Corporate trustees are a company or organization that is licensed to act as a trustee for trusts, estates, and other financial arrangements. The necessary qualifications for a corporate trustee in Canada vary depending on the province or territory, but generally, a corporate trustee should meet the provincial licensing requirements and obtain its license, in Ontario, from the relevant regulatory body, such as the Office of the Superintendent of Financial Institutions (OSFI) or the Financial Services Commission of Ontario (FSCO).

The staff at the corporate trustee administering the funds will generally have professional designations such as CPA or LLB/J.D. and have relevant experience.

Canada Trustee Obligations

In Canada, Trustees have several obligations to fulfill in their role as fiduciaries. These obligations are outlined in relevant provincial and federal legislation. Examples for Ontario are the Trustee Act, R.S.O. 1990, c. T.23, the Succession Law Reform Act, R.S.O. 1990, c. S.26, the Estates Act, R.S.O. 1990, c. E.21 and the Estates Administration Act, R.S.O. 1990, c. E.22 .

Some of the key obligations of Canada Trustees that are common to all include:

1. Duty of Loyalty: Trustees must act in the best interests of the beneficiaries and not in their interests.
2. Duty of Care: Trustees must follow accepted standards of practice and exercise the care, diligence, and skill that a prudent person would exercise in similar circumstances.
3. Duty of Confidentiality: Trustees must maintain the confidentiality of the trust and its affairs.
4. Duty to Act in Good Faith: A Canada trustee must act in good faith and with honesty in all their dealings with the trust and its beneficiaries.
5. Duty to Keep Accurate Records: Trustees must keep accurate and up-to-date records of the trust’s assets, liabilities, income, and expenses.
6. Duty to File Tax Returns: Trustees must file tax returns on behalf of the trust and pay any taxes owed.
7. Duty to Manage Trust Assets: Trustees must manage the trust’s assets prudently and follow the terms of the trust.
8. Duty to Make Decisions: Trustees must make decisions in the best interests of the beneficiaries and under the terms of the trust.
9. Duty to Report: Trustees must report to the beneficiaries and other interested parties on the status of the trust and its affairs.
10. Duty to Comply with Laws and Regulations: Trustees must comply with all relevant laws and regulations, including tax laws, securities laws, and other regulatory requirements.
11. Duty to Act Independently: Trustees must act independently and impartially in their decision-making and not be influenced by personal interests or biases.
12. Duty to Keep Beneficiaries Informed: Canada trustees must keep beneficiaries informed of the trust’s activities and any changes to the trust’s terms or administration.
13. Duty to Protect Trust Assets: Trustees must take reasonable steps to protect the trust’s assets from loss, damage, or theft.
14. Duty to Ensure Compliance with Trust Terms: Trustees must ensure that the trust is administered under the terms of the trust and any applicable laws and regulations.
15. Duty to Account for Trust Assets: Trustees must account for the trust’s assets and provide an accurate and detailed accounting of the trust’s activities and financial transactions.

Selecting and Working with a Canada Trustee

Factors to Consider

Selecting the right trustee can be a complicated task. Here are some important factors to think about:

1. Canada Trustee Qualifications: What qualifications and experience does the trustee have? Are they licensed and certified?
2. Trustee Reputation: What is the trustee’s reputation in the industry? Do they have a good track record of managing trusts and estates?
3. Trustee Fees: What are the trustee’s fees and costs? Are they reasonable and transparent?
4. Trustee Independence: Is the trustee independent and impartial, or do they have a conflict of interest?
5. Trustee Communication: How will the trustee communicate with you and other stakeholders? Are they responsive and transparent?
6. Trustee Expertise: Does the trustee have the necessary wide range of expertise and knowledge to manage your specific trust or estate?
7. Canada Trustee Capacity: Does the trustee have the capacity to manage your trust or estate? Are they able to handle the complexity and scope of the trust or estate?
8. Trustee Conflict of Interest: Does the trustee have a conflict of interest that could impact their ability to act in your best interests?
9. Trustee Liability: Is the trustee liable for any mistakes or errors they make while managing your trust or estate?
10. Trustee Succession: What happens if the trustee is unable to continue serving as the trustee? Is there a plan in place for succession?
11. Trustee Reporting: How will the trustee report to you and other stakeholders? Are they transparent and accountable?
12. Trustee Compliance: Does the trustee comply with all relevant laws and regulations? Are they up-to-date on changes to the law and regulations?
13. Trustee Dispute Resolution: How will disputes be resolved between the trustee and other stakeholders? Are there procedures in place for resolving disputes?
14. Trustee Termination: How can you terminate the trustee’s services if you are not satisfied with their performance?
15. Canada Trustee Replacement: How can you replace the trustee if they are unable to continue serving or if you are not satisfied with their performance?

By considering these issues, you can make an informed decision about choosing the right trustee for your needs. It’s essential to carefully evaluate the trustee’s qualifications, reputation, fees, and expertise to ensure that they are the right fit for your trust or estate.

Questions to Ask a Potential Canada Trustee

When selecting a potential Canada Trustee, it’s essential to ask the right questions to ensure that you’re making an informed decision. Here are some questions you should consider asking:

1. What is your experience in trust administration?
2. What is your expertise in the specific area of trust administration that I need (e.g. estate administration, tax planning, etc.)?
3. What is your approach to trust administration?
4. Do you have a specific philosophy or methodology that you follow?
5. How will you communicate with me and other stakeholders throughout the trust administration process?
6. What is your fee structure?
7. Are there any additional costs or expenses that I should be aware of?
8. What is your policy on conflicts of interest?
9. How do you handle situations where you may have a conflict of interest?
10. How do you ensure that you are acting in the best interests of the beneficiaries?
11. What is your process for managing and investing trust assets?
12. How do you handle disputes or disagreements between beneficiaries?
13. What is your policy on confidentiality and privacy?
14. How do you ensure that you are complying with all relevant laws and regulations?
15. What is your process for reporting to beneficiaries and other stakeholders?
16. What steps do you take if you’re no longer able to fulfill your role as trustee?
17. How do you address any errors or mistakes that might arise during the administration of the trust?
18. What is your approach to indemnification?
19. If any losses or damages occur during the trust administration, who is held accountable?
20. How do you ensure that you consistently provide excellent service to your clients?
21. What is your stance on receiving client feedback and handling complaints?
22. How do you keep yourself informed about changes in laws and regulations that impact
23. trust administration?
24. What is your commitment to ongoing education and professional development?

By asking these questions, you can get a clearer picture of a potential trustee’s qualifications, experience, and how they handle trust administration. This will help you decide if they’re a good match for your needs.

Canada Trustee FAQ

FAQs about LITs in Canada

1. What is a bankruptcy trustee?

A bankruptcy trustee, also known as a LIT, is a professional licensed by the Government of Canada to administer bankruptcies and consumer proposals. They help individuals navigate the bankruptcy process, ensuring compliance with the Bankruptcy and Insolvency Act and managing assets held in trust.

2. What are the main duties of a LIT?

The main duties of a LIT include:

• Assessing an individual’s financial situation and providing advice on debt relief options, including bankruptcy and consumer proposals.
• Administering the bankruptcy or consumer proposal process and ensuring compliance with legal requirements.
• Distributing any assets to creditors as per the regulations.
• Representing the interests of creditors and ensuring fairness in the process.

3. How do I find a LIT in Canada?

You can find a LIT by searching the Government of Canada’s searchable database of LITs. Additionally, local non-profit credit counselling organizations can provide referrals to reputable trustees. Please stay away from debt consultants.

4. What should I expect during a consultation with a LIT?

During a consultation, a LIT will review your financial situation, explain your debt relief options, and guide you through the bankruptcy or consumer proposal process. They will provide information about the implications of filing for bankruptcy and help you understand your rights and responsibilities.

5. Do I need a lawyer to file for bankruptcy in Canada?

No, in Canada, you do not need a lawyer to file for bankruptcy. You can file directly with a licensed trustee, who will guide you through the process. However, in certain complex cases, it may be beneficial to seek legal advice.

6. What are the costs associated with hiring a LIT?

The costs of hiring a LIT can vary depending on the complexity of your case. Generally, the fees are regulated and typically deducted from the funds collected from your assets during the bankruptcy process. Initial consultations are often free.

7. Can a LIT help with debt consolidation?

Yes, a bankruptcy trustee can provide advice on debt consolidation options and assist you in determining whether it is a viable solution for your financial situation. They consider all available debt relief options, not just bankruptcy.

8. What happens if a trustee does not perform their duties properly?

If a trustee fails to perform their duties as required by law, they may face disciplinary action from the OSB. This can include fines, suspension, or revocation of their license. If you have concerns about a trustee’s performance, you should report it to the appropriate regulatory body.

9. Can I file for bankruptcy more than once?

Yes, you can file for bankruptcy more than once in Canada. However, the implications and the length of time you must wait between filings depend on the circumstances of your financial situation and the previous bankruptcy discharge.

10. How long does the bankruptcy process take?

The bankruptcy process can vary in duration depending on individual circumstances, such as the complexity of the case and the debtor’s compliance with requirements. Typically, a straightforward first-time bankruptcy with no surplus income obligations can take about 9 months for the bankrupt person to receive their discharge.

FAQs about Estate Trustees in Canada

In acting as an Estate Trustee in the Province of Ontario, I encounter various questions from clients, family members, or beneficiaries. Here are some frequently asked questions about an Estate Trustee in the Province of Ontario, along with their answers:

1. What is the role of an Estate Trustee?

The Estate Trustee, commonly referred to as the executor, holds the responsibility of administering and distributing the estate of the deceased following the provisions outlined in the will. Their responsibilities encompass organizing the funeral, identifying and appraising assets, applying for probate, settling outstanding debts and tax obligations, and distributing the estate to the designated beneficiaries.

2. Who can be an Estate Trustee?

An Estate Trustee must be an adult who possesses the capacity to manage the associated responsibilities effectively. Suitable candidates may include a trusted family member, a close friend, or a qualified professional, such as an attorney or accountant. It is recommended to select an individual who demonstrates strong organizational skills, financial acumen, and a likelihood of longevity.

3. Do Estate Trustees get paid for their work?

Yes, Estate Trustees are entitled to reasonable compensation for their services, which can be specified in the will or determined by the trust law. The compensation may be a percentage of the estate’s value or based on the time and effort expended.

4. What happens if the Estate Trustee fails to perform their duties?

If an estate trustee doesn’t meet their obligations, the beneficiaries have the option to ask the court to remove the trustee and appoint someone else. Additionally, the original trustee could be held financially accountable for any losses that result from their negligence.

5. How do I choose an Estate Trustee?

When choosing an Estate Trustee, consider a trustworthy adult who will likely live longer than you, someone organized and knowledgeable about finances, and preferably someone who resides in Ontario. It’s also wise to discuss the role with them before naming them in your will.

6. Can I appoint more than one Estate Trustee?

Yes, you can appoint co-executors or multiple Estate Trustees to share the responsibilities. However, keep in mind that this may complicate the process since they will need to work together and make decisions collectively.

7. What qualifications should an Estate Trustee have?

While there are no formal qualifications required, an Estate Trustee should possess strong organizational skills, financial knowledge, and the ability to communicate effectively with beneficiaries and other involved parties.

8. What is probate, and does every estate need to go through it?

Probate is the legal procedure that involves confirming a will and giving the Estate Trustee the power to manage and distribute the estate. However, not all estates need to go through probate. Smaller or simpler estates might be exempt based on specific criteria.

9. What if there is no will?

If an individual passes away without a will, known as dying intestate, the distribution of their estate will follow the intestacy laws of Ontario. Under these laws, the court may appoint an Estate Trustee to oversee the management of the estate. When our firm assumes the role of Estate Trustee, this appointment is formalized through a court order.

10. How long does the role of Estate Trustee last?

The tenure of an Estate Trustee can vary considerably based on the complexity of the estate, typically ranging from several months to several years. This role entails numerous responsibilities, including the distribution of assets, which can be a time-intensive process.

The appointment of an Estate Trustee is a significant decision that necessitates careful consideration. A thorough understanding of the duties, rights, and obligations associated with this role can enhance the efficiency of the estate administration process.

Canada Trustee Conclusion

In conclusion, understanding the various types of Canada trustees is essential for anyone navigating the complexities of personal bankruptcy, estate administration, or corporate financial challenges. From Licensed Insolvency Trustees to Estate Trustees, each plays a critical role in providing support and guidance through difficult times. By familiarizing yourself with their responsibilities and the specific cases they handle, you can make informed decisions that align with your circumstances.

Whether you are dealing with financial distress or managing a loved one’s estate, this comprehensive guide aims to equip you with the knowledge needed to approach these situations with confidence and clarity. As you move forward, remember that seeking professional advice is a key step toward achieving the best possible outcomes in your financial and legal matters.

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The information provided in this Brandon’s Blog is intended for educational purposes only. It is not intended to constitute legal, financial, or professional advice. Readers are encouraged to seek professional advice regarding their specific situations. The content of this Brandon’s Blog should not be relied upon as a substitute for professional guidance or consultation. The author, Ira Smith Trustee & Receiver Inc. as well as any contributors to this Brandon’s Blog, do not assume any liability for any loss or damage resulting from reliance on the information provided herein.