Trust Trustee Required to ‘Bare’ All
Trusts are common in wills and estates and often require Court analysis if the terms of a trust are not clear.
In the recent decision of Karim v. Zakaria, 2022 ABQB 210, the Court reviewed whether a bare trust had been created and, if so, whether the trustee of the bare trust should be order to return the trust property.
In this case, Mr. Karim gave shares and leasehold interests to Ms. Zakaria as a bare trustee under two separate trusts. Mr. Karim had requested the trusts be returned to him, but Ms. Zakaria, as bare trustee, refused to return the shares and leasehold interests.
In its analysis, at paragraph 4, the Court examined the nature of the interests of each of the parties under the trust:
“Under each declaration, Ms. Zakaria acknowledged Mr. Karim's sole beneficial ownership of these assets and agreed (among other things) that she would act "at the direction of the Owner", "deal with the [property] ... in such manner as the Owner may determine", and "transfer the [property] to or as directed by the Owner forthwith upon the written demand of the Owner."
The Court, at paragraph 9, reviewed the applicable law to determine whether a bare trust existed between the parties:
“Here is the essence of a bare trust, per Professor Waters (Waters' Law of Trusts — Third Edition - 2005):
The usually accepted meaning of the term "bare", "naked" or "simple" trust is a trust where the trustee or trustees hold property without any duty to perform except to convey it to the beneficiary or beneficiaries upon demand. ...
This definition of the bare, naked, or simple trust assumes two things: (1) that the beneficiary or beneficiaries are able to call for the property on demand; and (2) either that no active duties were ever required by the settlor or that the active duties have been performed. [page 32, footnotes omitted].”
The Court ordered the shares and leasehold interests be returned to Mr. Karim because the trusts were bare trusts because, simply put, the essence of the trusts was to “hold the property and turn it back when called on.”
This case provides a simple example of a bare trust. If you have any questions on the matter of trusts, contact one of the estate litigation lawyers at Kantor LLP. We are happy to answer your questions.