What are the legal requirements to create a living trust in Alberta?
Executive summary
Creating a living (inter vivos) trust in Alberta requires a written trust deed that names the settlor, trustee and beneficiaries, sets out the trustees’ powers and distribution rules, and complies with Alberta’s Trustee Act and federal tax-reporting rules for trusts (e.g., T3 return and new bare‑trust reporting regimes) [1] [2] [3] [4]. Alberta’s revised Trustee Act (in force Feb 1, 2023) adds default provisions, statutory trustee duties, resignation/appointment processes and expanded beneficiary reporting obligations that apply to express trusts created before and after that date [5] [6].
1. What legally creates a living trust in Alberta — the core document and parties
A living trust is created by an express trust deed (also called a trust agreement) in which a settlor transfers property into a trust, appoints trustee, and specifies beneficiaries and distribution rules; the trustee then holds and manages trust assets according to that deed [1] [5]. The Trustee Act and common law determine trustee powers and duties; the trust deed should clearly specify the trustee’s powers, responsibilities and the mechanics of distributions [1] [2].
2. Statutory overlay: the revised Trustee Act changed the rules
Alberta’s revised Trustee Act received royal assent in 2022 and came into force Feb. 1, 2023; it broadens trustee law beyond testamentary trusts, provides default rules for trusts that lack detail, allows evidence outside the trust document to show settlor intent, and imposes wider reporting duties by trustees to qualified beneficiaries [6] [5]. The Act also formalizes procedures for trustee resignation, appointment of temporary trustees, and other administrative matters that previously often required court involvement [5].
3. Tax and reporting obligations trustees cannot ignore
Trusts are treated as taxpayers for Canadian income‑tax purposes and may need to file annual T3 trust returns; federal guidance (T3 Trust Guide) covers inter vivos trusts and filing requirements [3]. Recent federal reforms affecting bare trusts and trustee reporting mean trustees must watch evolving rules: trustees of certain trusts (including many bare trusts) were required to begin T3 filing for years ending Dec. 31, 2023 onward, and draft legislation and administrative changes have adjusted the scope and timing of bare‑trust reporting [4] [7] [8]. Financial penalties for negligent or false reporting are expressly flagged in practitioner guidance [4].
4. Practical drafting and governance requirements
Legal and accounting advisers consistently advise that a valid trust deed specify beneficiaries, distribution rules, trustee powers, and administration procedures; omissions invite default statutory rules under the Trustee Act and possible court applications [1] [5]. Trustees should keep accurate records, prepare annual financial reporting for qualified beneficiaries when required by the Trustee Act, and follow prudent‑investor and record‑keeping standards set out in statute and case law [5] [2].
5. Common traps and costs — who pays and who reports
Setting up and operating a trust involves legal fees, registration or title transfer costs when assets move into the trust, and ongoing accounting and tax compliance costs; more complex trusts raise higher fees [9]. Bare trusts raise special tax‑reporting issues: while beneficiaries may report income in some bare‑trust arrangements, new proposed rules and exemptions mean trustees must determine whether a T3 (and Schedule 15) is required for particular years [4] [8] [7].
6. Competing viewpoints and limits of current sources
Legal firms and provincial guidance emphasise the Trustee Act’s enhanced transparency and default provisions as beneficial for clarity and efficiency, while tax advisers highlight increased federal reporting burdens and transitional uncertainty around bare‑trust rules [5] [6] [4] [7]. Available sources do not mention detailed step‑by‑step statutory formalities such as execution formalities (witnesses/notarization) specific to Alberta living‑trust deeds, nor do they provide a single government checklist for estate planners; practitioners therefore still recommend bespoke legal advice [1] [9].
7. Bottom line for someone wanting to create a living trust in Alberta
You need a properly drafted trust deed that names settlor, trustee and beneficiaries, sets out powers and distributions, and aligns with Alberta’s Trustee Act; you must also plan for federal tax reporting and emerging bare‑trust rules and expect legal and tax advisory costs [1] [5] [3] [9]. Given statutory changes and evolving tax reporting regimes, the dominant expert advice in the sources is to consult an Alberta trust and estates lawyer and a tax professional to draft the deed, transfer assets correctly, and meet reporting obligations [1] [9] [4].