CanadaCan a trustee use capital from a trust to support beneficiaries?
Yes, a trustee may use trust capital to support beneficiaries — but only if the trust deed or will explicitly permits it, or if a court approves the encroachment.
What the Law Says
The Trust and Loan Companies Act does not govern when or how a trustee may spend trust capital — it only confirms that trust companies have the corporate power to act as trustees. The authority to use capital rests entirely on the trust’s governing document (e.g., will or trust deed) and applicable provincial trust legislation.
Trustees in Canada are fiduciaries bound by the terms of the trust instrument and provincial trust laws (e.g., Ontario’s Trustee Act or British Columbia’s Trustee Act). Unless the trust expressly allows it, a trustee generally cannot invade or spend the capital of the trust — they may only distribute income to beneficiaries.
The federal Trust and Loan Companies Act simply authorizes trust companies to serve in fiduciary roles; it does not define or expand their powers over trust property.
Statutory TextA trust company may act as executor, administrator, trustee, or guardian and perform all functions ancillary thereto.
— Trust and Loan Companies Act, s. 57 — Corporate powers — trust company
What Courts Have Said
The Supreme Court of Canada has clarified that encroaching on trust capital for a beneficiary’s benefit requires clear authorization — either in the trust instrument or through court approval.
The Court held that a trustee lacks inherent power to invade capital for a life tenant’s benefit unless the will or trust deed expressly grants that power; courts may authorize such encroachments only where justified by need and consistent with the settlor’s intent.
What to Do
Review the trust deed or will carefully to see if it grants power to encroach on capital.
If no express power exists, apply to the relevant provincial court (e.g., Superior Court) for permission to use capital — providing evidence of beneficiary need and alignment with settlor’s intent.
Obtain written consent from all affected beneficiaries (if capable and appropriate) or seek court direction if consent is impractical or contested.
Document all decisions and keep detailed records — trustees must be able to justify capital use as prudent and lawful.
Sources
Not legal advice. This article is general information based on publicly available sources, written for educational purposes. Laws change and individual situations vary. Consult a licensed attorney in your jurisdiction before acting on anything you read here. Last reviewed: 2026-06-08.