Kim Alexander Fullerton
Barrister & Solicitor
How is a Trust Established?
 It is a legal relationship between
 Settlor (FN pays money into Trust)
 Trustee(s) (holds the money for the benefit of FN)
 Beneficiary (FN & its Members)
 Members must approve the Trust Agreement as part of
the Land Claim Settlement Referendum (vote)
Kim Alexander Fullerton Barrister & Solicitor
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First Nation Trusts
 Three primary types of First Nation Trusts
 1) Corporate Trust
 2) Community Trust with Member Trustees
 3) Hybrid, some combination of the first two
Kim Alexander Fullerton Barrister & Solicitor
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Structure of First Nation Trusts
 Factors that can influence type of Trust
Agreement:
 Amount of $
 Uses of the Trust Property
 Decision making
 Costs to administer the Trust
Chief and Council believe that the Corporate
Trust Model is best for Georgina Island
Kim Alexander Fullerton Barrister & Solicitor
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Corporate Trust
 The role of the Trust is to
 Receive the $
 Invest the $
 Make an annual payment to the First Nation
The Capital is generally not spent (except for
clearly stated purposes like purchasing land)
 Rather it is invested to generate income which is
used to make the annual payment to the FN
Kim Alexander Fullerton Barrister & Solicitor
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Corporate Trust
 The Corporate Trustee generally has no role
in determining how funds are spent in the
community
 The decision to determine how to spend the
annual payment is left to the community –
which will need to be addressed separately
Kim Alexander Fullerton Barrister & Solicitor
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Corporate Trust
First Nation
Responsibility
Band
Settlement
Account
Community decides
what to do with funds
Uses & decision making
need to be addressed by
the First Nation
Trustee
Responsibility
Trust Account
Annual Payment
Investment
Initial Uses
Capital
Key Questions for Developing a Trust
 What is the Purpose of the Trust?
 How can the Trust Property be expended?
 How should the investment of the funds be handled?
 Personal Cash Distributions to Members (PCD)
 Impact of Inflation
 How long should the Trust Last?
 Demographics – How many Members will you have in
50 or 100 years?
Kim Alexander Fullerton Barrister & Solicitor
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How long should the Trust Last?
 No right or wrong answer
 Many First Nation Trusts are set up to last for 100 years
 Hard to know what the needs of GIFN will be in 100
years
 When the Trust ends it can always be rolled into a new
Trust
 Perhaps a shorter period might make sense, say 50
years?
Kim Alexander Fullerton Barrister & Solicitor
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Uses of Trust Property
Corporate Trust
 Annual Payment can be structured in different
ways
 Annual Income
 Fluctuates yearly based on rate of return
 Long term planning more difficult
 Need to address growth of the Trust Property
 Smoothing Mechanism
 Set minimum amount
 Percentage of Trust Property - 2% to 4%
 Makes long term planning easier
Kim Alexander Fullerton Barrister & Solicitor
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Plan
 One of the first questions or decisions that will
need to be made is “will the capital be spent and if
so how much and on what?”
 The more utilized upfront means less will be available to
invest and generate income in the long term
 The more spent upfront on a PCD provides an
immediate benefit to the current generation, but less
benefits to future generations
 Need to determine what is the appropriate balance
for the community
Kim Alexander Fullerton Barrister & Solicitor
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Personal Cash Distribution (PCD)
 Three Main Questions:
 1)
 2)
 3)
How Much?
Who Gets It?
When?
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How Much?
 You have about 700 members, so:
 $1,000 payment will cost $700,000
 $2,000 payment will cost $1.4 million
 $5,000 payment will cost $3.5 million
 $10,000 payment will cost $7 million
 $20,000 payment will cost $14 million
 You need to find the right balance of immediate
benefit versus long term benefits
Kim Alexander Fullerton Barrister & Solicitor
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Who Gets the PCD?
 Not as easy as it looks
 Generally must be both a member and alive on the day
of the vote to get PCD
 You have control of your own membership (not Indian
Affairs)
 What about people that have applied for membership
and not yet been added?
 What happens if someone dies after the vote but
before the PCD is paid?
Kim Alexander Fullerton Barrister & Solicitor
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When?
 Mainly about minors (members under 18 at time of
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vote)
Can simply pay members when they turn 18
Could pick a later age, like 21 or 25
Can link it to graduation from high school
Or both, such as “when turn 21 or graduate from high
school, which ever occurs first”
 Again, what to do with PCD of a minor who dies before
receiving it?
Kim Alexander Fullerton Barrister & Solicitor
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Initial Uses of Trust Capital
 Often a First Nation will decide to spend some of the
capital from the trust right away on important projects
to improve the community like schools, daycare,
community centres, recreational facilities,
transportation, etc, upon recommendation from the
membership.
Kim Alexander Fullerton Barrister & Solicitor
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Purpose
 The fundamental purposes for the Trust must
be determined
 Specific Claim Settlement Trust, so it must be for
the “long term benefit of GIFN”
 The Settlement Agreement with Canada will allow
Georgina Island to buy land and add it to reserve
 GIFN can purchase up to 3,000 acres of land
and create up to 3 new reserves in the next 30
years should the First Nation choose to
Kim Alexander Fullerton Barrister & Solicitor
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Land Purchase
 Need to have mechanism in place to permit GIFN to
access funds from the Trust to buy the land
 May be wise to have band owned corporation or an
agent acting on behalf of the band to purchase the
lands (price might go up otherwise)
 Need projections of what land in the area costs and
some sort of limits should be placed on how much of
the Trust capital can be spent on land
 Need to have ongoing dialogue with members about
where to purchase land
Kim Alexander Fullerton Barrister & Solicitor
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Investing
 Investment provisions dictated by the purpose,
plan and time horizon
 Have specific provisions in the Trust
Agreement to address investing the Trust
Property which, at a minimum:
 Requires the Trustee and the FN to obtain qualified
advice
 Requires the development of an Investment Policy
 Clearly provides for who can be retained to do the
investing
Kim Alexander Fullerton Barrister & Solicitor
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Taxation
 A FN Trust is neither an Indian nor a First
Nation and must pay tax on any retained
income in the Trust at the end of every year
 Get qualified advice, there are ways to avoid
paying tax
 While taxation is important, it should not be
the overriding factor in determining the plan
for the Trust
Kim Alexander Fullerton Barrister & Solicitor
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Reporting
 The operation of the Trust should be open and
transparent
 Regular reporting requirements
 Regular meetings with Council and members
 If people know what is going on, they feel more
comfortable
Kim Alexander Fullerton Barrister & Solicitor
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Annual Operating Expenditures
 What is it going to cost to implement the
Trust?
 Need controls in the Trust Agreement on such
expenditures
 Budgetary process
 Annual Expenditure should not exceed 1% of the
value of the trust property
Kim Alexander Fullerton Barrister & Solicitor
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ACCOUNTING OF THE COMPENSATION (10K)
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COMPENSATION
LOAN FUNDING
NET PAYMENT
$ 85,000,000
covered
$ 85,000,000
PERSONAL CASH DISTRIBUTION ($10,000)
COMMUNITY DEVELOPMENT
TOTAL
$ 7,000,000
$ ?
$ 7,000,000
NET AMOUNT IN TRUST
$ 78,000,000
MINUMUM ANNUAL INCOME (4%)
$ 3,120,000
Kim Alexander Fullerton Barrister & Solicitor
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ACCOUNTING OF THE COMPENSATION (20K)
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COMPENSATION
LOAN FUNDING
NET PAYMENT
$ 85,000,000
covered
$ 85,000,000
PERSONAL CASH DISTRIBUTION ($20,000)
COMMUNITY DEVELOPMENT
TOTAL
$ 14,000,000
$ ?
$ 14,000,000
NET AMOUNT IN TRUST
$ 71,000,000
MINUMUM ANNUAL INCOME (4%)
$ 2,840,000
Kim Alexander Fullerton Barrister & Solicitor
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Next Steps
 Chief and Council will take the information
that is being gathered from the membership
and prepare a draft Trust Agreement for your
consideration
 We should have it ready by August or
September
 Everyone will have the opportunity to review
the draft TA and provide input
 It will be part of the referendum or vote
Kim Alexander Fullerton Barrister & Solicitor
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Questions?
Kim Alexander Fullerton Barrister & Solicitor
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