Children's Trust Services
Children's Trusts - Overview
The Public Guardian and Trustee administers trusts on behalf of children in the following circumstances:
- when a child is entitled to receive life insurance proceeds, or money from an estate or trust and there is no other guardian of the child's estate willing or able to act
- when the court orders that money payable to a child plaintiff be held in trust by The Public Guardian and Trustee during the child's minority
- at the request of a member of the public when it appears appropriate to do so
In Manitoba, the legal age of majority is 18. "Child" or "children" refers to anyone who has not yet turned 18.
Frequently Asked Questions:
What are The Public Guardian and Trustee's duties in managing children's trusts?
Like any trustee, The Public Guardian and Trustee must protect trust assets and ensure they are handled, invested and distributed appropriately until the child turns 18 or the age specified in the trust document. Our office has policies in place to help our trust administrators in making decisions about children's trusts.
The Public Guardian and Trustee's duties as trustee are to:
- hold and protect trust funds until the child turns 18
- invest the funds during the term of the trust
- make appropriate disbursements from the trust
- pay out the funds to the child after he or she turns 18
Why does The Public Guardian and Trustee administer children's trusts?
As the Official Guardian for children in Manitoba, The Public Guardian and Trustee administers children's trusts when required by law or court order. Our duty to administer a trust could happen in a number of scenarios, including the following:
- There is a Court judgment, settlement or insurance payment for the benefit of a child. This generally occurs when a child is injured, loses a parent, or is a victim of crime.
- A child is named as the beneficiary of a registered investment, pension or life insurance policy, or receives some other benefit or windfall.
- A child inherits money or property from someone who had no will, or from someone whose will did not name anyone else to manage the assets on the child's behalf.
Who in The Public Guardian and Trustee's Office administers children's trusts?
The authority of The Public Guardian and Trustee to manage trusts is delegated to the various staff members employed by the office. Children's trusts are looked after by trust administrators who oversee the trusts from beginning to end with the help of other staff. Other staff who work on trusts include tax and investment specialists, accountants, support staff and lawyers.
Can children use any of their trust money before they turn 18?
Yes, in some cases, if the use is approved by The Public Guardian and Trustee. The procedure for requesting trust money held by our office is:
- The parent or guardian sends a written request to the trust administrator explaining how the money would be spent. This request should include a detailed record of the parent or guardian's assets and monthly income and expenses. If the child is over 14 years old, the request must also include the child's signature showing agreement with the request for money.
- The trust administrator reviews each request, taking into consideration the amount of the trust, the financial situation of the parent or guardian, the age of the child, the nature of the request and any conditions of the trust document.
- The trust administrator prepares a recommendation and forwards it, along with all supporting information, to the Estates and Trusts administration manager and/or The Public Guardian and Trustee for review and approval.
- The trust administrator writes back to the parent or guardian (and child if applicable) explaining the results of the decision and enclosing a cheque if the request is approved.
What are valid reasons for requesting trust money?
Trust administrators have a number of guidelines to follow when requests for trust monies are received:
- First, any specific instructions in the trust document or court order must be honoured.
- Second, direction is taken from the laws in Manitoba that rule the administration of trusts.
- Third, each request is considered based on the amount of the trust, the financial situation of the parent or guardian, the age of the child and the nature of the request.
In some cases, trust money can be made available for special opportunities that will benefit the child's educational, athletic or artistic development.
How is trust money invested?
The trust administrator creates a trust account for each child's trust. The money in these accounts is generally invested in our Common Fund, which is a fund made up of the majority of money we manage. This fund earns a better interest rate than most single, separate accounts.
Sometimes a portion of the money from very large trust accounts may be invested separately in bonds, guaranteed investment certificates or blue chip stocks to diversify the investment. This type of decision is made by The Public Guardian and Trustee in consultation with our investment and taxation specialists.
Does each trust earn interest?
Yes. All interest earned by the investment of money from each trust is paid to the trust account monthly.
Does The Public Guardian and Trustee charge fees to administer a trust?
Yes. The Public Guardian and Trustee is not funded by the Province of Manitoba, so we must charge fees to pay for our operation. These fees are set out in our Fee Schedule.
When is trust money paid out?
The money is paid out to the child as soon as possible after he or she turns 18, or the age specified in the trust document. Shortly before this, the trust administrator contacts the child and makes arrangements so that he or she can sign a release.
Why is a release needed?
A release is a legal document that acknowledges that the amount of money being paid out represents the full amount of the trust plus all interest due, and approves the amount of fees charged by our office. If the child can't or won't sign a release, we take the matter to court so the court can review our administration and set fees.
How is trust money paid out?
Once a signed release or court decision is received, a cheque is prepared for the balance of the trust, plus all interest earned, minus our fees and any amounts previously paid out. The trust administrator makes arrangements with the child to deliver the cheque.
Are children's trusts taxable?
The original capital amounts of children's trust funds, and any interest income earned on personal injury trusts, are generally not taxable. However, interest income earned by other types of trusts may be taxable. Our office is required to annually report to Canada Revenue Agency all interest income earned on taxable trusts by way of T-3 tax information slips.
If a trust is taxable, who files the return?
The T-3 slips prepared by our office are sent to Canada Revenue Agency, with copies going to the parent or guardian. It is the parent or guardian's responsibility to decide whether this income, when combined with any other sources of taxable income for the child, exceeds the basic exemption amount. If so, the parent or guardian will have to file a tax return on the child's behalf.
There are a number of other factors to consider, such as whether the child is eligible for any tax credits or whether the child has dependents of his or her own. Because the tax rules are complex and may differ for each situation, the parent or guardian may need to get professional tax advice.
Can trust money be used to pay taxes?
Yes, in most cases trust money can be used to pay taxes. If a child owes income tax due to interest income earned on a trust, it may be possible to pay the tax from the trust account. Once the tax return is completed and the exact tax amount is known, the parent or guardian should contact the trust administrator to request tax payment.
Can someone other than The Public Guardian and Trustee administer children's trusts?
Yes, in some cases certain people such as a parent or personal guardian living in Manitoba may apply to court under The Infants' Estates Act to be appointed as trustee. However, where a large amount of money is involved, the court may require a trust company or other independent professional to act. Some things to be aware of before applying to court to be appointed trustee are:
- The trustee is required to preserve and invest the trust money until the child turns 18.
- The trustee is required to keep comprehensive records of all investments, receipts and payments of the child's money or property. The court order may require the trustee to periodically show the accounts to the court. When the child turns 18 and receives the balance of the trust money, he or she is entitled to receive a detailed record of accounting for the duration of the trust.
- Unless the trust document or court order expressly allows it, the trustee may not be entitled to spend the trust money for the child's benefit before the child turns 18. The trustee may need to get legal advice on this point.
- Trust money is not to be used for the regular financial support of the child unless the trust allows it. Parents are legally required to support their children and the trust money can only be used before the child turns 18 in certain circumstances as stated in the trust document and/or relevant laws.
- In some cases, the court will require parents or guardians to post a bond before naming them as trustees. This means they must sign a legal document acknowledging their responsibility to properly administer the trust and are liable for their actions in that role.
Where can I get more information?
If you have more questions, please contact us.
