How To Become A Trustee Without Knowing It
Being a trustee is a significant responsibility with obligations to account for the trust property that you hold and to keep the trust property secure. You must make decisions for the good of the trust beneficiaries and not in your own interest. If you do not keep the trust property secure, you could be personally liable to the beneficiaries.
For these reasons, it is important to think about the responsibilities of becoming a trustee. However, as a recent Ontario Superior Court decision shows, it is possible to become a trustee without intending to.
The case involved the adult daughter, Amal, her mother, Amina, and Amina's husband, Mohamed. Amal was, at the relevant time, living with Amina and Mohamed. As a settlement to a previous lawsuit, Amal received almost 20,000. She gave the deposited the money to her bank account but later transferred it, along with some of Amina's money that was also in Amal's bank account.
The same day as Amal transferred the money to Mohamed, Amina and Mohamed went to the bank and, on Amina signed a Change Acknowledgement that shows that she, not Amal was the beneficiary to the money.
At a later date, Amal moved away from home and asked for her money. She did not receive it. Rather Amal learned that Mohamed had spent all of the money on instructions by Amina. Mohamed testified he thought the money was Amina's so when she instructed him to spend it he did.
The testimony of Amal and Amina differed regarding whose money it was. The deputy judge did not believe Amina's version of events and found that Amal was telling the truth. This meant that the $20,000 deposited into Mohamed's account was Amal's.
A trust is created when three certainties are present. They are 1) certainty of intention (the trustee knows that s/he will hold the property for someone else); 2) certainty of subject (the trust property can be clearly identified); and 3) certainty of objects (the beneficiary of the trust is identifiable).
In this case, a trust was created. Mohamed knew the money was not his and that he was holding it for someone else. The amount of money, the subject of the trust was known. Only the issue of who the beneficiary was, needed clarification. The uncertainty of the actual beneficiary though was not sufficient to negate the existence of the trust. Mohamed was found to be a trustee and was responsible to pay Amal back for the money he spent.
The Lesson: If you are holding money for another person, find out exactly who you are holding the money for and act in their interest not your own. If you trust funds improperly you could be personally responsible to replace them.
Ahmed v Ibrahim et al, 2016 ONSC 6430, http://www.canlii.org/en/on/onscdc/doc/2016/2016onsc6430/2016onsc6430.pdf
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