Inheritances by children in Ontario

In Ontario, a minor child (under 18) is not entitled to directly inherit funds.

If a child is entitled to inherit (either under a will, or because of an intestacy) there are four options:

The Will establishes a trust for the child

The Will may establish a trust, and name the trustee.  The trustee could be the estate trustee or a different person.  The trustee will hold the funds in the manner described in the Will.

Pro:      Clear.  Testator choses trustee, and sets terms of trust (eg. Payments for the benefit of the child, ultimate release date, etc.)

Con:     Must be in the Will.

Costs:    Moderate.  There will be costs to administer the trust, but they should not be particularly large.

To consider:  Depending on how long the trust will be held for the benefit of the child, choose the trustee carefully.   For instance, a fund that runs for 25 years, can be problematic for an older trustee.

If there is no Will, or the Will does not establish the terms of the trust for the child’s inheritance, then the three remaining options are:

If the amount is less than $35,000

The funds can be paid to the parent of the child “in trust”.

Pro:      Low cost.

Quick, easy.

Access to funds for the benefit of the child during

Con:     Amount is capped.

Requires financially prudent parent.

Pay the inheritance into Court

Funds can be paid “into Court” and the Court (the Province of Ontario) will hold the funds in trust for the child beneficiary until the child reaches age 18 at which time the child can withdraw them.

Pro:

“Low-ish” cost.  A fee of 3% is charged on investment income credited to the minor’s account and on all payments out of court. In addition a care and management fee is charged.

Funds can be deposited and removed relatively quickly.

Con:     No access to any of the income or principal until age 18

All funds released to the child at age 18

Pay it to the child’s “guardian of property”

A suitable guardian of property for a child can be appointed by the Courts.  The inheritance can then be paid to this guardian, to be held in trust by them for the benefit of the child.  The child’s parent is not automatically the child’s guardian of property.

Background: A child’s parent is automatically a ‘guardian of the person’ for the child, but is NOT automatically the child’s ‘guardian of property’.  If there is to be a guardian for property of a child, the guardian must be appointed by the Courts. The Court application is made by the guardian, and if the Court approves their application, the Court will set certain terms of the guardianship.  Preference is usually given to the parents, but other guardians are possible and if the amount is large it is likely that a trust company will need to be involved.

Pro:      Flexible.  Terms established by Court order.

Possible that guardian can access some of the funds for the benefit of the child before 18, if that is provided for in the Court order.

Con:     More costly and takes time.

Requires Court application

Funds must be provided to the child when they turn 18

Might require fees for the trustee (not common if the parent is the trustee; common if a third party is the trustee).