You cannot leave inheritance money directly to a minor child in Newfoundland and Labrador. Instead, you must set up a testamentary trust within your will, appointing a trusted individual to manage the funds until the child reaches the age of majority (19 years old) or an older age of your choosing.
Ensuring your children or grandchildren are financially secure is the primary reason most people write a will. However, under Canadian law, a minor cannot legally manage large sums of money or own real estate. If you pass away and leave a $100,000 CAD life insurance policy directly to a 10-year-old, the law will step in to freeze those funds.
In Newfoundland and Labrador, if you do not have a proper legal mechanism in place, the provincial Public Trustee may take control of the child’s inheritance. To avoid government intervention and ensure the money is used exactly how you want it to be, you must create a testamentary trust. This guide will show you how to structure your will to protect your minor beneficiaries effectively.
Step-by-Step Process in Newfoundland and Labrador
Whether your family is based in Mount Pearl, Gander, or Happy Valley-Goose Bay, drafting a will with a trust requires precise legal wording. Here is how you can set up a secure future for your minor children.
Step 1: Choose the Age of Inheritance
📍 The age of majority in Newfoundland and Labrador is 19 years old. If you do not specify an age in your will, the child will automatically receive their entire inheritance on their 19th birthday in one massive lump sum. Most parents prefer to delay this. You can instruct your lawyer to hold the funds in trust until the child turns 21, 25, or even 30. You can also stagger the payouts (e.g., 30% at age 21, and the remainder at age 25).
Step 2: Appoint a Trustee
A trustee is the person who will hold and manage the money while the child is underage. This person will invest the funds and file annual tax returns for the trust. You can name the same person who is acting as your child’s legal guardian, or you can choose someone else entirely to serve as a financial check-and-balance. The trustee must be incredibly reliable and financially literate.
Step 3: Define the Trust Guidelines
You must outline exactly what the trustee is allowed to spend the money on before the child reaches the target age. Most parents use standard legal phrasing that allows the trustee to use the funds for the “maintenance, education, and general benefit” of the child. This means the trustee can use trust money to pay for university tuition, braces, or hockey camp, ensuring the child’s daily needs are met without draining the capital recklessly.
| Method of Leaving Money | Legal Outcome in NL | Level of Control |
|---|---|---|
| Directly (No Trust) | Funds seized and managed by the Public Trustee until age 19 | Zero. The government dictates how it is invested. |
| Testamentary Trust | Managed by your chosen Trustee until the age you specify | High. You control the payout ages and spending rules. |
| Registered Education Savings Plan (RESP) | Passes to a named successor subscriber for schooling | Moderate. Specific to educational expenses. |
How Much Does it Cost in Newfoundland and Labrador?
💰 Setting up a trust within your will is highly affordable compared to the cost of government intervention later on.
- Lawyer Fees: Having a local law firm draft a comprehensive will containing a testamentary trust generally costs between $500 and $1,200 CAD, depending on the complexity of your assets.
- Trustee Compensation: Unless they are a family member who waives the fee, a trustee can legally claim compensation (up to 5% of the trust’s value) for the years they spend managing the investments.
- Tax Returns: The trust is considered a separate taxpayer by the CRA. The trustee will likely need to pay an accountant $300 to $600 CAD annually to file the trust’s tax return (T3).
How Long Does the Process Take?
Drafting the will itself only takes a few weeks from your initial consultation with a lawyer to the final signing. Once you pass away, the testamentary trust springs into existence and lasts for as many years as it takes for the minor child to reach the specific age you designated in the document.
Frequently Asked Questions (FAQ)
What happens if the trustee passes away?
You should always name an alternate (backup) trustee in your will. If your primary trustee passes away or declines the role, the alternate will immediately take over the management of the minor’s funds.
Does the guardian have to be the trustee?
No. You can name your sister to be the child’s guardian (raising them), and your brother to be the trustee (managing the money). The guardian would simply ask the trustee for funds when the child needs something like winter boots or a computer.
Can I leave money to grandchildren who are not born yet?
Yes. A lawyer can draft a “class gift” clause, leaving a portion of your estate to “all my grandchildren alive at the time of my death.” A trust will automatically be created for any of them who are under 19.
Does the trust money earn interest?
Yes, the trustee has a legal duty to invest the funds prudently. The money will typically be placed in safe investments like GICs or conservative mutual funds so it grows until the child is old enough to inherit it.
What if the child needs a car for university?
If your will gives the trustee the power to use funds for the “general benefit” of the child, the trustee has the legal discretion to buy the child a reliable car to safely commute to their classes.
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