21 July 2003 External T.I. 2002-017676A - In Trust Accounts

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.

Principal Issues: Legal nature of "in trust" accounts.

Position: Depends on the arrangement.

Reasons: Applicable law.

XXXXXXXXXX 	2002-017676
		Yves Moreno
July 21, 2003

Dear XXXXXXXXXX:

Re: In Trust Accounts

This is in reply to your letter dated October 28, 2002, wherein you ask for clarification of the position of the Canada Customs and Revenue Agency (the "CCRA") (previously Revenue Canada) with respect to so called "in trust accounts". You also question previous CCRA statements suggesting that they might be agency agreements where the account is created for the benefit of a minor.

The CCRA's position has consistently been that such determination has to be made on a case by case basis in light of the specific facts, but the CCRA continues to receive a steady flow of enquiries about the legal status of those accounts.

In Will-Kare Paving & Contracting Limited v. Her Majesty the Queen, 2000 DTC 6479, the Supreme Court held that legal relations must be determined before applying the Income Tax Act:

To apply a "plain meaning" interpretation of the concept of a sale in the case at bar would assume that the Act operates in a vacuum, oblivious to the legal characterization of the broader commercial relationships it affects. It is not a commercial code in addition to a taxation statute. Previous jurisprudence of this Court has assumed that reference must be given to the broader commercial law to give meaning to words that, outside the Act, are well defined. See Continential Bank v. R., 2 S.C.R. 298 (S.C.C.). See also P.W. Hogg, J.E. Magee and T. Cook, Principles of Canadian Tax Law (3rd ed., 1999), at p. 2, where the authors opine:

The Income Tax Act relies implicitly on the general law, especially the law of contract and property...Whether a person is ...[a] beneficiary of a trust...will usually have an effect on tax liability and will turn on concepts contained in the general law, usually provincial law.

This reasoning is reflected in the recent amendments to the Interpretation Act. Section 8.1 of that statute provides:

Both the common law and the civil law are equally authoritative and recognized sources of the law of property and civil rights in Canada and, unless provided by law, if in interpreting an enactment it is necessary to refer to a province's rules, principles or concepts forming part of the law of property and civil rights, reference must be made to the rules, principles or concepts in force in the province at the time the enactment is being applied.

Trusts are used in a multitude of contexts. Lawyers use trust accounts where they keep their clients' moneys (retainers, sale proceeds, court settlements). Trusts are also used when someone receives money on behalf of someone else where those persons have a contractual relationship. Traditionally, trusts have been used to hold and manage property for the benefit of minors because it is said that minors do not have the legal capacity to enter into legal relationships and purchase financial instruments.

Financial institutions issue bulletins and leaflets explaining what a trust is and the benefits of creating a trust for the benefit of minors. Some promotional documents explain the difference between a formal and an informal trust, emphasizing that formal trusts are usually drafted by a lawyer and indicate how the assets are to be administered, the duration of the trust and how the assets are to be distributed whereas informal trusts are only documented by the investment contract ("In Trust accounts"). In Trust accounts are accounts set up for the benefit of someone, where no trust deed accompanies the creation of the account. The only document describing the relations between the parties involved is the investment contract.

The applicable provincial law has to be examined in determining whether such an In Trust account is a trust. As far as Ontario, the Office of the Children's Lawyer for the province of Ontario has published a brochure describing the guardianship of property of minor children in the province of Ontario.

That brochure states:

...a parent is not automatically the "guardian of property" of his or her minor child's property. A parent can only receive such authority on behalf of a child by statute, court order or other document such as a will...Where an adult person does not have the legal authority to receive the monies for the minor, the monies must be paid into court....

It later states:

Exceptions to Payments into Court

1. If the money or property is worth less that $10,000 and it is NOT payable under a court judgement or order, it may be paid or transferred to

? a parent with whom the child resides...

The person receiving the money or property on behalf of the child has the same responsibility as a guardian of property for its care and maintenance (section 51 of the Children's Law Reform Act (CLRA))...

The brochure does not comment on In Trust accounts and our understanding is that the Office of the Children's Lawyer for the province of Ontario has not otherwise commented on such accounts due to the factual nature of the determination involved.

We take this opportunity to provide you with a portion of the conceptual background in making that determination in an effort to address future queries in that respect. As indicated in Re Rispin ((1912) 25 O.L.R. 633, 2 D.L.R. 644; affirmed 46 S.C.R. 649, 8 D.L.R. 756:

The cases bearing upon similar questions [...] are numerous, and one might even say sometimes embarrassing, if not conflicting. [...] But no case is, after all, particularly useful, unless, as seldom happens, it arose upon similar language and under similar circumstances, or has laid down some general principle of construction applicable to all such questions.

Yet, they are the pillars on which lies the institution of trust.

The problem in determining whether a trust is created when an account is opened without documentation is twofold. On the one hand, for a trust relationship to be established, all the requirements of the applicable law need to be met. On the other hand, it might be very difficult for the taxpayer to prove that the three certainties were met unless the creation of the trust is clearly documented.

Conditions of existence of a trust

In common law and equity (we will not address the Quebec Civil Code), a trust exists where three certainties exist: intent, object and subject matter. As indicated in previous positions, the most problematic issue involving In Trust accounts is determining whether the settlor had the intention to create a trust. Therefore, we will emphasize that element, taking for granted that the other two certainties are met. However, should there be no clearly identifiable beneficiaries or no transfer of property by the settlor to a trustee (see the Atinco case summarized hereafter), the trust would fail.

In Law of Trusts in Canada (2nd ed.), DWH Waters indicates at page 109:

The words employed to set up a trust, therefore, must show that the transferee is to take the property not beneficially, but for objects which the transferor describes. The words which nearly always reveal the intention are "in trust", or "as trustee for", but it is well established in common law courts, including those of Canada, that these words are neither conclusive nor indispensable. In the context of all the language of a bequest, Garrow J.A. came to the conclusion in Re Rispin ((1912) 25 O.L.R. 633, 2 D.L.R. 644; affirmed 46 S.C.R. 649, 8 D.L.R. 756) that the words "in trust", though used, did not have controlling importance, and that no trust had been created.

There is no sacramental formula to create a trust. As a matter of fact, "in most common law jurisdictions, writing is not required for either method [transfer of the property to the trustee or a trust by declaration] of creating an express trust of personal property in which the settlor holds the legal title"[prior to the creation of the trust] (M. Cullity and C. Brown, Taxation and Estate Planning (3rd ed.), p. 557).

The banking industry has adopted a practice of asking on the investment application form that is filled to open an account whether the account is opened in the context of a formal or informal trust relationship. The investment contract informs the bank about the nature of the account and the applicable set of rules and duties. Part of those rules are described by M.H. Ogilvie in Canadian Banking Law, where he states at page 493:

While a bank may hold funds in trust, it is not responsible prima facie for ensuring that the funds are properly applied within the terms of this trust, nor for their misappropriation by a customer who is a trustee. However, where a bank is put on inquiry and does not inquire it will be liable for any resulting losses. Where a bank knowingly permits trust funds to be diverted, it will be liable for breach of trust.

Also, on page 494:

A bank may not transfer a balance from what it knows to be a trust account held by a customer to the same customer's private account.

At page 109 of Law of Trusts in Canada (2nd ed.), DMH Waters describes the following situation:

"In trust" are words commonly found written after the name of the payee of guaranteed investment certificates, and term deposit instruments. Such an act creates an inherent ambiguity as to the intent of the investor or depositor, when no trust objects are mentioned. Did he intend the payee to be the trust beneficiary for his personal benefit, to hold on trust for implied third parties or purposes, or to hold on resulting trust for the investor or depositor (i.e., himself)?

As indicated in Re Kayford Ltd., [1975] 1 All E. R. 604:

Payment into a separate bank account is a useful (though by no means conclusive) indication of an intention to create a trust, but of course there is nothing to prevent the company from binding itself by a trust even if there are no effective banking arrangements.

These words were echoed in Re H.B. Haina & Associates Inc., 86 DLR (3d) 262:

Merely because the moneys were deposited to "trust" accounts does not make them "trust" moneys.

Accordingly, merely ticking the box "in trust" in a standardized form is not by itself sufficient to meet the certainty of intent test. Other factors must be considered in making that determination.

In Moss v. The Queen, 2000 DTC 1729 (TCC), the taxpayer tried to argue that she was the legal but not the beneficial owner of the money transferred in her account by her husband. The Court rejected that argument because (i) she had sole signing authority and (ii) she used the fund for all sorts of purposes.

In Ristimaki v. Ristimaki, 46 O.R. (3d) 721, money had been set aside by someone in the course of matrimonial action in the lawyer's trust bank account to provide for payment to his wife should the court determine that she was entitled to it. The Court concluded that the wife was entitled to that amount and the issue was whether she ranked equally with other creditors or if that money had been set aside in a trust for her benefit. In light of all the evidence and having attached some importance to the fact that the T5 slips were issued to the husband, the Court concluded that it was not the intention of the husband to create a trust and that the sole purpose of that account was to ensure that assets would remain in the jurisdiction pending the completion of the matrimonial action.

In Atinco Paper Products Limited v. The Queen, 78 DTC 6387, the Federal Court of Appeal stated:

It was then argued that by the Granovsky brothers opening the trust bank accounts executory trusts came into existence which became executed trusts some time after May 31, 1963. The short answer to that contention is that the evidence shows that no settlement was made or contemplated by Miss Stein in the terms of the executed trust documents. They were drawn by the Appellants' solicitor on the instructions of the Granovskys. The only gifts she ever made were the personal ones to Philip and Irving with superimposed thereon the expressed wish as to what they should do with the money. The method they chose to comply with that wish cannot affect the nature of the gift. Moreover, the trust documents show that the trustees in each of the trust agreements were the two brothers. The April 1963 gifts were to each independently, and apparently, the initial bank accounts were in their names alone. No transfer or delivery of funds was made by Miss Stein to the brothers jointly nor, it is apparent from her testimony, did she ever intend to do so. This argument, thus, in my view, fails.

In the case In re Bellasis' Trust, (1871) L.R. 12 Eq. 218, 24 LT 664, 56 Sol. Jo. 11, General Bellasis transferred a debenture by deed to three persons without any declaration of trust. The Court concluded that a trust had been declared by the letter written by General Bellasis to his solicitor wherein he named as trustees three persons (who were already trustees under another trust) and stating "The indenture unto the above-named trustees for my niece [Mrs C.M.] and her children". However, notwithstanding that the trustees understood that that they had been selected to hold the debenture as trustees under the same terms as the other trust created for Mrs. C.M., which trust also provided for the issue of deceased children, the Court concluded that there was no trust for the issue of the deceased children of Mrs. C.M.

In Gaskell v. Gaskell, (1828) 2 Y & J, 504 (Exch. Ch. in Eq.), the Court had to determine whether a trust had been created when Mr. Gaskell gave instructions to his banker "to open a fresh account with [named persons] as trustees for [wife], during her life, and after her decease as trustees for [son], during his minority, and you will transfer the sum of 15001, from my account to this". The bank account was entitled "[named individuals], trustees for [wife], during her life, and after her decease as trustees for [son], during his minority". The Court noted that the persons designated as trustees "had never exercised any act of ownership over the funds, or acted in any manner as trustees". The evidence also indicated that the bank did not consider that account to be under the control of Mr. Gaskell, that the latter sent a letter implying that he considered he had control over those accounts and that the accounts were created "with a view to evade the legacy duty".

There would be great difficulty in this case to contend that if [Mr. Gaskell] had revoked the appointment, the bankers could have refused to pay the amount to him; or that the trustees could, in that case, have recovered the funds from the bankers. The trust for the wife does not appear to have been for her separate use; and had not the testator, therefore, a right to receive that which was not settled to her separate use? And if he could so receive it during his life, the transfer was clearly in effect a legacy to her after his decease. If a man wholly denudes himself of property, and places it in trustees, over whom he has no sort of control, I will not say he may not do so in such a manner as to be effectual to defeat the legacy duty. It is not, however, necessary for me to give any opinion on such a case on the present occasion; for here I consider it to be clear, that the testator had not parted with all control over the fund.

In Smith v. Warde, 15 Sim 56, the Court had to determine whether a trust was created when a bank account was opened. The instructions given for the opening of the account were as follows: "Look at my account current, and [...] make a purchase in some public stock [...] for my boy Lionel Eldred, who is this day twelve months old. Let it be in my own name and in my wife's, [...] in trust for Lionel Eldred Smith". The Court concluded that no trust had been created.

Besides which we find that, from the times when the two sums of stock were purchased, they were treated by Sir Lionel and his agents as his own property. The dividends were received by his agents, no doubt under a power of attorney from him, and were placed to his account. Could anything be more unjust than to say, from inferences drawn from vague expressions in letters, that the father intended himself to be a trustee of the stock for his son; and that, therefore, not only the capital, but all the dividends which he received, belonged to his son; the effect of which would be that the dispositions which the father made of his property would all be defeated, and his affairs would be thrown into a state which he never contemplated; and that, too, in a case in which no one can say whether a trust for the son was a trust in praesenti, or only in case he survived his father, and perhaps his mother also; for the time at which the son's claim commenced cannot be defined.

The transfer, though made into the joint names of Sir Lionel and his wife, gave Sir Lionel the complete dominion over the stock, and he exercised that dominion down to the time of his death; and therefore I consider I am bound to declare that neither his son nor his wife have any claim upon the stock, but that it remained part of his assets at the time of his death.

Other cases where the courts have concluded that there was no certainty of intention are summarized in another technical interpretation (9623997). Those cases are Kingsdale Securities Co. v. M.N.R., 74 D.T.C. 6674 at 6679 (F.C.A.), Atinco Paper Products Ltd. v. The Queen, 78 D.T.C. 6387 (F.C.A.); Ablan Leon (1964) Ltd. v. M.N.R., 76 D.T.C. 6280 (F.C.A.); Fletcher v. M.N.R. 87 D.T.C. 624 (T.C.C.), Harvey v. The Queen, 94 D.T.C. 1910 (T.C.C.).

However, under some circumstances, a trust might exist without a formal agreement. In Blum v. The Queen, 99 DTC 290, the Court concluded that even though no formal trust agreement existed, a trust had been created when shares were issued and the shares certificates indicated they were issued to an individual in trust for each of his grandchildren. The evidence indicated that the individual had discussed the settling of a trust with his lawyer, that his lawyer had sent a letter to an accountant indicating that the shares had been issued in trust for the grandchildren, that the trustee had filed tax returns in the names of his grandchildren in respect of the income generated by those shares but not for the trust, that the agreements of sale described the individual as holding the shares in trust and that he never benefited from the proceeds resulting from their disposition, which were lost in subsequent investments. Again, the court assessed all the surrounding circumstances in making that determination. As with every other trust case, this case lies on its specific facts.

In Koons v. Quibell, (1998) 21 ETR (2d) 66, the Saskatchewan Court of Queen's Bench had to determine whether a trust was created when money was deposited in an account. The only documentation was the form that was filled to set up the account which indicated that the account was in the name of "Koons, Julianna Dorothy c/o Cheryl Larson Trustee, Vincent Hawkes Trustee" and which specified "in trust to eighteen years".

The evidence satisfies me that there was a valid trust by transfer in which the estate of Lennart Larson was the settlor, the two executors [...] were the trustees, the plaintiff was the beneficiary, and the subject matter of the trust was money set aside in the account set up in the name of Julianna Koons in trust, with the two co-executors as trustees. Even if the matter is seen as a trust by declaration, the defendant's subsequent communication to the plaintiff's parents and the annual forwarding of the T-5 slips to the parents confirms the documentary evidence that trusts for the benefit of the children were intended by the 1981 creation of the accounts and the transfer by the executors of the funds from the estate to the accounts. The defendant testified that it was always her intention to retain control of the funds until the children were of the age of majority [...]. This intention, of course, is completely consistent with the creation of a trust for the children until they reached the age of 18.

That abstract clearly indicates that all the facts are to be taken into account in determining whether an In Trust account is a trust or not. The investment contract was one of the elements taken into account by the court.

In Toronto General Trusts Corporation v. Keyes, (1907) 15 OLR 30, Mrs. Phelam advised the accountant of the corporation that she wished to deposit $3,000 in the names of three individuals and the corporation acknowledged receipt from the three individuals (the "investors") of an amount of money "in trust for investment on account of" the investors. The arrangement between the investors and the corporation was that "the said principal shall be invested in or loaned upon such securities as the corporation deems safe, in the name of the corporation, but to be held by the corporation as trustee for the [three individuals]".

The corporation was to repay an amount at a specified date, grossed up by a return of 4%. One of the investors testified that she was told "it was just the same as if I put it there myself; and if I wanted to draw it at any time I could; and if I wanted to draw any of it at any time I could do so". The two other investors were told the same thing. The accountant of the corporation indicated that Mrs. Phelam "never interfered with the matter in any way". The cheques for the interest were made payable to the three individuals as the beneficiaries named in the guarantee receipts. The Court concluded that a trust was created and that Mrs. Phelam, namely the one who transferred the money, "placed the money out of her power and control". The fact that the cheques were endorsed by the beneficiaries in her favor was not seen as contrary to that conclusion because it "does not affect the validity or enforceability of the trust of the corpus in their favor".

In Vandenberg v. Palmer, (1858) 4 K & Y 204; 32 LTOS 87; 70 ER 85, the Court concluded that a trust was created with respect to funds held in a separate account headed "A.V., Esq., exchange account on account of children". A letter sent by a person to his correspondents, directing them "to transfer from my tea account a sum so as to make it 1000 [pounds] which is to be invested in East India Company's bills in London [...] and to be kept so employed with activity for the benefit of my children". That letter directed that interest and profit thereon be used "to pay for their schooling and expenses in London, and their passage back when their education is complete". The Court indicated that "these words are ambiguous, and, taken alone, would leave it open to doubt whether the deceased meant to part with all control over the fund". A subsequent letter indicated that the bank "desired to have my opinion as regards the reinvestment, which of course I declined giving, as I consider myself to have no further control over that amount, as it belongs to my children, which sum I wish you to keep continually employed backwards and forwards for their benefit and [...] I will remit you regularly such sums as may be necessary for their schooling expenses, so that this 1000 [pounds] may not be touched for the present for the said purposes". In light of that statement, the Court concluded that "no words could be stronger [...] to renounce all ownership of the fund" and held that a trust existed. The Court held that conclusion, notwithstanding that the person had indicated that the correspondents were required to consider it as "subject to the orders of his executors".

In Wheatley v. Purr, 1 Kee 551, the defendant had transferred money to her account as trustees for the plaintiffs. She kept control over the account and could have received money from the bank. The Court concluded that a trust had been created.

Evidence that a trust exists

As stated by DWM Waters in Law of Trusts in Canada, 2nd ed., p. 108:

If tax avoidance is the object of a transaction, the courts are likely to be particularly concerned with whether there was an intention to create a trust, or merely a desire to give that appearance. See Ablan Leon (1964) Ltd. v. M.N.R., (1976) C.T.C. 506, 76 D.T.C. 6280 (Fed. C.A.).

In Harvey v. The Queen, 94 DTC 1910, the Court stated:

A bona fide loan to a properly constituted trust may well meet the criteria in Dunkelman to avoid the provisions of subsection 75(1). A somewhat loose arrangement between husband and wife where the wife, without any form of documentation, calls herself a guardian of the infant children does not. It must be recognized that subsection 75(1) is designed to prevent income splitting and if one wishes to avoid the section on the basis of Dunkelman the formalities of a real trust must be set up. While a real trust could presumably borrow funds, an infant cannot do so directly. Such a contract is void.

As indicated by Oosterhoff and Gillese at page 286 of Text, Commentary and Cases on Trusts (4th ed.):

If a person transfers property to trustees and clearly intends to create a trust, but fails to state the terms of the trust and they are not ascertainable by other admissible evidence, the trust fails.

In some cases, the courts have agreed that a trust existed, even though no deed was drafted and the documentary evidence was scarce. In other cases, the courts have concluded that no trust existed even if the parties had signed a document stating that their intention was to create a trust. In Vandenberg v. Palmer, (1958) 4 K & J 204; 32 LTOS 87; 70 E.R. 85, the Court summarizes the approach of the courts as follows:

The Court, as Vice-Chancellor Wigram says in Hughes v. Stubbs, looks to the nature of the transaction, and the whole of the transaction; expressions contained in letters may be explained away by the acts of the party. And, in Smith v. Warde, the Court was of opinion that letters were explained away by the acts of Sir Lionel; those acts shewing that, down to his death, he considered the property as his own. In the case before me, I find no acts to explain away or alter the effect of the original letters. Everything is consistent with the direction originally given by the deceased.

The informal context in which In Trust accounts are created puts them in that grey zone where all facts have to be considered in order to determine their legal nature and where no sacramental formula will dictate the nature of the relationship that was created.

A conservative conclusion would be that all other things being equal, a formal trust deed would be the best proof that the intention to create a trust exists. Although the whole conduct of the parties is required to be taken into account, it offers the best proof of the existence of an intention to create a trust. As indicated in In re Bellasis' Trust, (1871) L.R. 12 Eq. 218, 24 LT 664, 56 Sol. Jo. 11, regarding the issue of deceased children:

In this case it is, of course, useless to speculate upon what General Bellasis may have intended to do. If he had made a formal declaration of trust, or taken [...] a letter [from the trustees that they held the property upon the same terms as the other trust created for the beneficiaries] as was suggested to him [by his lawyer], the matter would have been free from doubt; but he did not do so.

The following statement in Hughes v. Stubbs, 1 Hare, 476, is along the same lines:

There does not appear to have been any subsequent communication of the facts in the lifetime of the testatrix from which the Court might have drawn the same conclusion as from an antecedent agreement or promise; and, although an antecedent agreement or promise, or a subsequent communication, may not be necessary to the completion of a voluntary trust, the absence of such circumstances leaves me nothing but the transaction itself from which to draw a conclusion. It would be sufficient in this case to say that there is nothing in the transaction which necessarily implies that the testatrix (intending only a benefit to take effect after here death, and in connection with her will) meant to place this disposition of her property out of her control in her lifetime.

On the one hand, it is more likely that the settlor and trustee intend to enter in a trust relationship when they fully understand the legal rights and obligations that a trust agreement involves. As stated in Smith v. Warde, and quoted in Vandenberg v. Palmer:

I admit that Sir Lionel intended to do something for his son; but the question is whether his words are to be taken strictly, or with reference to what he thought to be the state of the law, without exactly knowing it? Would he not have been surprised if he had been told that all the dividends which he had received were his son's? His acts shew that he did not intend what his letters express, namely, that the two sums of stock should, as soon as they were purchased, become the property of his son.

The fact that the settlors had no real idea of the issues involved was also considered in Kingsdale Securities Co. v. M.N.R., 74 D.T.C. 6674 at 6679 (F.C.A.) where the Court concluded that no trust was settled:

Their knowledge of the nature of the trusts, the beneficiaries, the trustees and the purposes was, to say the least, limited and casts real doubt on their ability to form the necessary intention to create the trusts pleaded.

On the other hand, the declaratory aspect of a trust deed is its principal attribute whereas that aspect might be incidental in an investment contract.

The CCRA's position on how the existence of a trust is to be determined is clearly disclosed on pages 12 to 14 of 9623997.

Legal nature of In Trust accounts

If it is not a trust, what is it? In some cases, the courts have concluded that there was an immediate gift of the property (see by analogy Atinco Paper and Re Freedent et al, 1 B.C.L.R., 204). In other cases that courts have concluded that the property remains as part of the assets of the purported transferor (Ristimaki v. Ristimaki, Gaskell v. Gaskell, Smith v. Warde, Hughes v. Stubbs).

Documents 9717475, 9809755, 9829145, 9830997, 2001-0067745 and 2002-0135235 suggest that the relationship may be one "akin to agency as opposed to a trust". You query how this position would be sustainable where minors are involved as they would not have the capacity to enter into an agency agreement nor to be bound by the actions of the agent. In 1988, DMH Waters stated (Conference Report article, "An overview of the Law of Trusts", pp.35:6-9):

The distinction between a trust and an agency is equally clear. In the case of a trust, on the one hand, the property is vested in a trustee who has rights of disposition and management over that property, while the right of enjoyment is in the beneficiary...In the case of an agency at common law, on the other hand, the principal gives instructions to the agent and is always free to vary those instructions at some later stage, including when the agent has already commenced the task in question...To my mind, it is a trust, rather than an agency, that exists when the trustee's powers are such that in at least one significant decision-making matter he is "his own man" independent of others in what he decided to do.

In the case of Vandenberg v. Palmer, (1858) 4 K & Y 204; 32 LTOS 87; 70 ER 85, the Court indicated that had the fund been entirely under the control of the person who transferred the money, it "should have no hesitation in holding that no valid trust was created, and that the transaction resulted in nothing more than an agency on the part of [the persons managing the account] for [that person]". The person who opens the account, being major, might be a principal who gives instructions in which case an agency relationship may exist. It is one possibility amongst many others.

Trust, gift, agency are some of the possibilities. If the relationship is not a trust, it might be difficult to characterize what is the nature of the arrangement but trusts are not a residual class of relationships.

Conclusion

The CCRA's role is to administer the Income Tax Act and to make sure its provisions are properly applied to the legal relationships established by taxpayers. Whether a trust exists at law is a factual and legal issue. An indication in an investment account form will not create a trust unless the three certainties are met and can be proven. In light of the variety of circumstances and types of forms that may exist, the CCRA is in no better position than the courts in making that determination and cannot make a general statement with respect to the nature of In Trust accounts.

This opinion is provided in accordance with the comments in paragraph 22 of Information Circular 70-6R5.

We trust our comments will be of assistance.

Yours truly,

Theresa Murphy
Section Manager
for Division Director
International and Trusts Division
Income Tax Rulings Directorate
Policy and Legislation Branch