The rule in “Saunders v. Vautier” is often referred to in scenarios where a discretionary trust is set up in a Will or during the lifetime of the trust-maker. A discretionary trust gives trustees the power to decide how much beneficiaries get from a trust and when they get it. All capital and income is distributed completely at their discretion. This means there’s more flexibility and assets can be protected if circumstances change for any reason.
The rule in “Saunders v. Vautier” allows beneficiaries of a trust to ignore the will-maker’s/trust-maker’s intentions and vary the terms of a trust. If all potential beneficiaries of a trust, collectively representing 100% of the potential “ownership” of the assets of the trust, unanimously direct that the trust is to be terminated and/or varied, the trustees must act in accordance with the beneficiaries’ direction regardless of whether such direction goes against the will-maker’s/trust-maker’s “intention” in establishing the trust.
A common example for the application of the rule is a situation where a beneficiary will not receive certain property until a specific age, however the provision providing for the gift does not contain a “gift-over” to another beneficiary should the originally named beneficiary not reach the specified age. The beneficiary can immediately demand receipt of the gift when attaining 18 years of age thereby collapsing the trust.
If even one beneficiary of the trust, however remote their interest may be, should refuse to consent to the proposed variation, the rule in Saunders v. Vautier must not be utilized, and the trust will continue as originally settled. If one of the potential beneficiaries of the trust is under a legal disability, whether as a result of being a minor or otherwise, the principles from Saunders v. Vautier may still be utilized, however the consent of the beneficiary under a legal disability must be obtained under the Variation of Trusts Act (Ontario) which allows the court to consent to the proposed variation on behalf of the beneficiary under a legal disability.
If the will-maker or trust-maker wants to avoid the application of the rule, the terms of the trust should contain a “gift-over” to another beneficiary should the originally named beneficiary pass away.
Our will planning lawyers at Duensing Law make sure your wishes are legally binding and clearly expressed, safeguarding your assets and loved ones. We take the time to grasp your particular situation. Our team creates thorough wills and powers of attorney to guide you on effective estate management and avoidance of typical mistakes. We also assist with the establishment of discretionary trusts, therefore giving you peace of mind knowing your will is managed in line with your wishes. If you have any other questions regarding will planning, you can contact our will planning lawyers at 416-601-4769.
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