Understanding the Intricacies of Funds Held In Trust
Trust funds are a significant aspect of financial planning and asset protection. However, they are often misunderstood. This article aims to demystify the concept of Funds Held In Trust and shed light on its various aspects.
1. The Definition of Trust Funds
Trust funds, also known as Funds Held In Trust, are a type of legal entity that holds and manages assets on behalf of another individual or entity. The trust fund is managed by a trustee, who is responsible for making decisions about how the assets are used or invested.
2. The Legal Framework Around Trust Funds
Trust Funds are governed by Section 67(1)(a) of the Bankruptcy & Insolvency Act. According to this law, the property of a bankrupt individual that is divisible among his/her creditors does not include property held on behalf of another individual.
3. Criteria for Property to be Held In Trust
For a property to qualify as held in trust, it must meet three critical criteria:
- Certainty of intent;
- Certainty of object;
- Certainty of subject matter.
Failing to meet these conditions may result in the property not being considered as held in trust.
4. Example of Funds Held In Trust
An example of funds held in trust can be money saved for your children. This money should be deposited in a separate account, clearly marked as being held in trust. For instance, the account could be named “Mother Smith in trust for Daughter Smith”.
5. The Risk of Co-Mingling Funds
Co-mingling of funds refers to the mixing of trust funds with other funds. For example, if a joint bank account is held in the name of Mother Smith and Daughter Smith, the funds are not considered held in trust because they are co-mingled.
6. Registered Education Savings Plans (RESPs)
Registered Education Savings Plans (RESPs) are not considered funds held in trust. As such, they can be liquidated in bankruptcy proceedings.
7. Exemptions for Cash on Hand
S. 23(1) of the Manitoba Executions Act provides an exemption for cash on hand. This includes food and fuel necessary for the debtor and his/her family for a period of up to six months, or the cash equivalent. However, this does not apply to vehicular fuel but only to heating fuel for the home.
8. Additional Exemptions
In addition to the exemption for cash on hand, you may also be entitled to other small exemptions. These can vary depending on your specific situation and the applicable laws.
9. The Role of the Trustee
The trustee is a critical figure in the management of Funds Held In Trust. They are responsible for ensuring that the funds are properly managed and used in accordance with the terms of the trust.
10. Conclusion
Understanding the intricacies of Funds Held In Trust is essential for financial planning and asset protection. By meeting the necessary criteria, setting up a trust fund can provide a secure way to manage and protect your assets.
Remember, it’s always advisable to consult with a professional trustee or financial advisor to understand the complexities involved in setting up and managing a trust fund. This can help ensure that your assets are protected and used in the best possible way.
