Pursuant to the Family Law Act of B.C. the increase in the value of a spouse’s interest in a trust is family property. In order to divide this property the court must attribute a value to the trust at the beginning and end of the relationship. In a simple trust this is easy as the trust capital can be valued at both dates but it becomes complicated if the trust is a discretionary trust.
In a discretionary trust the trustee has the discretion to determine how much if any of the trust property will be advanced to each of the beneficiaries and the advances may be unequal.
The courts have struggled with this and some of the criteria that the courts have considered are as follows:
• Whether the beneficiary could compel payments from the trust;
• Whether the beneficiary could wind-up the trust in accordance with the rule in Saunders vs. Vautier (1841), Cr. & Ph. 240, 41 E.R. 482;
• Whether the beneficiary received regular payments from the trust, or whether they had only a “mere hope” of receiving distributions;
• The relationship of the beneficiaries to the trustees: are the trustees independent and at arm’s length or are they family members who may not act independently?
Deborah A. Todd
