June 3, 2020 Category News, Our Latest Insight
Many parents assume that they have a legal right to hold and manage their child’s monies, or other assets, without limitation. This assumption was correct under B.C. law until 2013 when the Family Law Act (the “Act”) was proclaimed.
The Act sets out who can hold and manage a child’s money or other assets.
A guardian may only receive and hold up to a maximum of $10,000.00 in value (whether cash or assets) on behalf of their child unless the guardian has been appointed as a trustee for the child. If a child is entitled to more than $10,000 in assets then they are required to have a trustee hold their assets for them. The Act states that a guardian is not automatically a trustee of their child’s property by virtue of being their parent.
The Public Guardian and Trustee is the Provincial Government office that acts as trustee for minors by default unless a different trustee is appointed by the Supreme Court. So, any cash or asset above the limit must be paid to the public Guardian and Trustee of British Columbia to hold until the child reaches the age of majority, absent a trustee appointment by the Supreme Court.
Where a guardian holds their child’s monies/assets, whether as formally appointed trustee or as guardian for amounts that are less than $10,000, they must uphold the following common law duties:
- Duty of Loyalty
Generally speaking, the guardian cannot profit from the assets they are holding for their child and cannot put themself in the position of a conflict of interest.
- Duty of Care
The guardian must generally exercise the duty of care in a manner at least equivalent to a prudent person in administering their own affairs. Section 15.2 of the Trustee Act (British Columbia) requires a guardian to exercise the care, skill, diligence and judgment that a prudent investor would exercise in making investments.
- Duty to communicate
A guardian has the obligation to communicate with their child about the assets they are holding including management decisions and outcomes. Of course, such communication should be made based on the child’s age and maturity level.
Government payments to guardians and/or children
Guardians receive monies from the government for a number of reasons. It is important to note which benefits guardians receive on behalf of their child and which they receive personally because they are a child’s guardian. For example:
- Canada Pension Plan Child Benefits – This is a monthly payment that the Federal Government pays to the child of a deceased contributor. As such, any guardian who receives these payments does so in trust on the child’s behalf and the duties stated above apply.
- Canada Child Benefit and BC Early Childhood Tax Benefit – The guardian receives this payment, if eligible. This payment is the guardian’s money, not the child’s. Its purpose is to help parents with the cost of raising children. Such a guardian does not receive these payments in trust and has no duties to their child with regard to how they use the monies.
If your child is entitled to a lump sum payment that is more than $10,000 then a trustee is obviously required. Monthly payments, such as the Canada Pension Plan Child Benefit, are more difficult to assess. Whether or not a trustee is required under the Act will depend on the amount of the monthly benefit, the age of the child, and if the payments are accumulated in any form or spent. For example: the 2020 maximum monthly benefit is $255.03 according to https://www.canada.ca/en/services/benefits/publicpensions/cpp/payment-amounts.html. At this amount, a child will receive more than $10,000 after 15 years. If the child begins receiving payments at a young enough age and the guardian plans to save and invest the payments, it is possible for the guardian to receive in aggregate over $10,000 in Canada Pension Plan payments before the child turns 19.
How is a trustee appointed?
The B.C. Supreme Court may appoint a guardian to be a child’s trustee, or anyone who brings an application to them, if the applicant shows that it is in the best interests of the child. Such an application can be made for a specific asset or group of assets or for all of the child’s assets generally.
The Supreme Court considers the following factors in making their decision:
- The applicant’s ability to manage the property;
- The applicant’s plans for the property;
- The child’s views, if appropriate;
- The relationship between the applicant and the child;
- The wishes of the guardian(s);
- Benefits and risks of appointing the applicant versus other options such as the PGT or other applicants; and
- Whether or not the proposed order benefits the interests of the child best.
What happens when a child turns 19?
Unless there is a trust provision or court order that states otherwise, when a child turns 19 a guardian or child’s trustee must transfer to the child all of the monies and other assets that they are holding for the child. The child’s trustee is also obligated to provide an accounting detailing their management of the child’s monies and other assets from the date they became a trustee. A guardian, as a fiduciary, must also be obliged to such an accounting to the child.