The Public Guardian and Trustee (PGT) receives funds in a variety of contexts to hold in trust and manage on behalf of children and youth, including death benefits, personal injury settlement proceeds, life insurance proceeds where a minor is a beneficiary and no trustee is named to administer the funds, and shares of estates where no trustee is named to administer the funds. Funds are typically held in trust until the child turns 18 (the age of majority in Saskatchewan) unless disbursed earlier for the benefit of the child. The PGT may hold funds up to age 25 if the individual, upon attaining age of majority, requests that the funds continue to be held.
Children and Youth Trust Accounts
In Saskatchewan, the parents of a child are the property guardians for their child. However, they do not have the authority to hold money to which their child is entitled unless they have approval from a Saskatchewan Court of King's Bench and provide appropriate securities to ensure the child's interests are protected. The Public Guardian and Trustee Act provides authority for the PGT to receive, hold and administer money to which a child is entitled until the child attains the age of 18, if a parent has not been given the authority by the court to hold the funds.
Some circumstances where the PGT will receive money for a child are:
- permanent impairment, loss of studies, wage replacement or death benefits payable by SGI;
- proceeds from a lawsuit related to an injury claim or Fatal Accidents Act claim;
- life insurance proceeds, where no trustee was named on the beneficiary designation form;
- a share of an estate where the person died without a will;
- a share of an estate where a person died with a will, but did not provide authority for the executor to hold the child's share, or where the executor does not wish to hold the child's share;
- proceeds from the sale or lease of real property registered in the child's name;
- lottery winnings; and
- gifts.
The PGT sets up an individual trust account for each child. All funds received by the Office of the Public Guardian and Trustee are placed in the Common Fund. The Common Fund is made up of a bank account and investments in bonds and stocks. An investment manager, monitored by a consultant and an Investment Advisory Committee, makes approved investments.
The PGT will issue a T3 Supplementary Slip before March 31 each year to report the income earned on the trust. Income earned on the child's trust fund is considered income for the child and it is the responsibility of the parent or guardian to determine whether it is necessary to file a return and to file the return on behalf of the child.
The monthly fee for administering a child's trust fund is 1/12 of one per cent of the amount held in trust. There is also a fixed fee of $20.00 to open an account and a fixed fee of $20.00 to release an account. A fee is also charged on the income that is earned and deposited to the account.
The PGT has the discretion and the authority to make payments from a child's trust fund for the education, maintenance and benefit of the child. Each request for funds will be considered on an individual basis. Consideration is given to a number of factors, such as the source of the funds, the ability of the parents to provide for the child, the amount of the request, the purpose of the request, the amount in the child's trust and the age of the child.
As a rule, the PGT considers it to be the responsibility of the parents to provide for a child. When the funds are from an injury claim, payments are not usually made from a child's account. If the funds are from life insurance or death benefits paid as a result of the death of a parent, and depending on the individual circumstances, funds may be released for a child's trust for expenses such as maintenance, medical or educational expenses. Funds can also be released to pay income tax that the child has to pay as a result of income earned on the trust.
Requests for funds from a child's trust must be made in writing by the guardian and must be backed up with receipts. The request must also be signed by the child, if the child is fourteen or older.
If a minor dies before receiving the funds, the PGT's responsibilities end. The funds will be released to the personal representative of the child's estate, and the personal representative is responsible for distributing the funds according to law.
When a Youth Turns Eighteen
When a child turns 18, he or she legally becomes an adult and the PGT will release the funds being held in trust, unless the child requests that the funds continue to be held. The PGT can hold the funds up to the age of 25 where the individual, upon attaining the age of majority, requests that the funds continue to be held. The PGT cannot hold the funds past the individual's 25th birthday.
Some parents may be concerned about their child receiving a large sum of money when he or she turns 18. However, the law provides that the child is entitled to the funds and the funds cannot be held back unless the child requests the PGT to continue to hold the funds. The funds cannot be held back simply because the child may not appear to be responsible or mature.
Parents are encouraged to discuss this with the child and provide advice and direction to the child with respect to managing his or her funds as an adult. Parents are also encouraged to assist the child in making arrangements to receive the funds from the PGT and to make arrangements for further investment of the funds.
There are some circumstances where children turning 18 may not have the mental capacity to manage their finances. These children will likely require support and assistance as adults, and alternative plans must be made for them. Substitute decision-making options should be explored, and legal advice should be sought.
If the child would like to make arrangements to withdraw the funds after he or she turns 18, the child should contact the Office of the Public Guardian and Trustee. If they would like to withdraw only a portion of the funds and have the office continue to hold the rest of the money, this can be done but no further withdrawals can be made unless it is for the balance of the funds. A copy of the child's birth certificate will have to be provided if this has not already been done.
If the child does not have a bank account, it is recommended that they open one so that the money can be deposited directly to the bank account. If the child does not have a bank account, the payment will be made by cheque. This is not as quick or as safe as a direct deposit, and it might be difficult to cash the cheque.
The lump sum that is turned over to the child is not taxable income. However, the income that is earned on the money each year may be taxable, depending on the source of the funds. If the money was paid as a result of injuries suffered by the child, the income is not taxable until the year after the child turns 21. If the money is from other sources, then the income earned each year may be considered to be taxable income.
A T3 Supplementary Slip is issued each year to report the income. When the funds are withdrawn, a T3 Slip will be issued before March 31 of the next year to report the income.
The office will also provide a Capital Gains Report to report the capital gains or losses resulting from the account being closed. This information will be needed for the child's income tax return for the year that the money was withdrawn and the child may have to pay income tax on any taxable capital gain, as well as the income that is reported on the T3 Supplementary Slip.