Date: July 26, 1994
Bulletin # 4812
|Re:||Minors' Accounts in Quebec|
The Quebec Civil Code was substantially revised at the beginning of this year, causing some confusion about whether minors (children not yet 18 years of age) who are not married can open accounts in our mutual funds. There have also been many questions concerning whether accounts can or should be opened directly in the name of a minor, or in the name of the minor's parents in trust for the minor. The legal department has provided us with the following information in response to these questions:
Under the new Civil Code, parents are deemed automatically to be joint tutors (ie: guardians) of their children who are minors. As joint tutors, they must act together in the administration of the minor's property, unless one parent has died in which case the surviving parent has these powers. Either parent may bestow upon the other a Mandate allowing the recipient to act on behalf of both parents. Any documentation (including applications, transfers, and surrenders) involving a minor's account in Quebec must be signed by both parents, unless one parent has died (in which case we require a copy of the death certificate), or unless one parent has given the other a Mandate to act for both (in which case we require an original or notarially certified copy of the Mandate).
As joint tutors, parents are deemed to have 'simple administration' of their minor children's accounts. Essentially, this means that the parents must perform all acts necessary to preserve and maintain the minor's property, and must invest sums of money under their administration in accordance with the rules for presumed sound investments in the Civil Code.
The new Civil Code makes express reference to mutual funds as being a presumed sound investment provided that the fund meets certain conditions. Unfortunately, these conditions greatly restrict the investment powers of mutual funds to the extent that most funds, including our funds, do not automatically qualify as a presumed sound investment.
This does not mean that the money of a minor in Quebec cannot be invested in our funds. It means that an investment in our funds is not automatically deemed to be a sound investment, but may be justified in the circumstances. In other words, the parents may be called upon at some point to justify that an investment in one of our funds is appropriate and in the best interests of the child. (Please note that investments in GICs issued by Investors Group Trust Co. Ltd. are presumed to be sound under the Civil Code, although no more than $60,000 should be invested in a GIC so as to ensure that the full amount is covered by deposit insurance).
Although parents are joint tutors for their minor children's property, they are obliged to obtain the advice or authorization from a 'tutorship council' (formerly called a 'family council') if the total value of a child's property exceeds $25,000. The role of the tutorship council is to supervise the tutorship by the parents. The council consists of three persons (generally other than family members) who meet to give advice and approve certain investment decisions, the purpose being to ensure that the parents are property administering the minor's property (The parents may apply to the Quebec courts to have a tutorship council comprised of just one person, as designated by the court, where the parents feel that it is important that the financial affairs of the minor are kept as confidential as possible).
We strongly suggest that parents obtain the approval of the tutorship council prior to making an investment for their minor children in our mutual funds, especially if the investment is $25,000 or more, due to the fact that our funds are not automatically deemed to be p resumed sound investments under the Civil Code. In addition, where the parents wish to sell or transfer an investment valued in excess of $25,000, they must obtain the approval of the tutorship council. Therefore, if a child has an account valued at $25,000 or more, the parents must obtain approval from the council before providing us with instructions to surrender or transfer the account (The Civil Code also requires that the parents obtain an 'expert appraisal' concerning the value of the investment before selling it (ie: before redeeming or transferring the account). This should not be difficult in the case of our mutual funds as their unit values are quoted daily in the newspaper, and it is likely that this could be used to justify the value of a fund redemption or transfer if necessary). These requirements cannot be legally avoided by dividing a single surrender or transfer into a series of smaller surrenders or transfers under $25,000, although the parents may transact a single redemption or transfer of less than $25,000 that is not part of a series of redemptions from the same account without the approval of the tutorship council.
Remember that the tutorship council must be consulted only if the aggregate value of all the minor's assets (not just his or her accounts at Investors Group) is $25,000 or more. Where the total property of a minor exceeds $25,000, the parents are also required to notify the Public Curator of Quebec, and must provide the Public Curator with an inventory of the minor's investments that are subject to their tutorship. It has been our experience that the Public Curator will require the parents to agree not to surrender or transfer accounts valued in excess of $25,000 without prior approval of the Public Curator. In these circumstances, the Public Curator also often requests that the financial institution provide a letter acknowledging that the investment will not be redeemed or transferred without the Public Curator's prior approval.
In circumstances where the overall value of the child's property is $25,000 or more, the parents should be informed that they will have to notify the Public Curator of the opening of an account, and that the Public Curator may require that the amount be frozen (especially where the investment into the account is $25,000 or more). To date, we are not aware of the Public Curator requesting that an account valued at less than $25,000 be frozen.
We will not ask the parents to prove that the tutorship council has given its approval to make, surrender or transfer an investment in our funds, but the parents may be asked by the Public Curator to do so when they file the inventory of investments under their tutorship.
In summary, our mutual funds are not considered 'presumed sound investments' under the new Civil Code, but the money of a minor may be invested in our funds if the parents have decided that the investment is prudent and appropriate in the circumstances (and have obtained permission to make the investment from the tutorship council where the total property of the minor subject to their tutorship is $25,000 or more). It is our position that responsibility for compliance with the Quebec Civil Code rests with the parents, and that we are not responsible for ensuring that the investment is appropriate. It is the responsibility of the parent to justify the appropriateness of the investment if asked to do so by the Quebec Public Curator.
We are reviewing the Application Form for our products to determine whether any additional disclosure is necessary with respect to these issues. In the meantime, both parents will be required to sign the application form, unless one has died, or one has given the other a Mandate to sign on behalf of both parents. Until a new application is printed and distributed with these disclosures, parents opening a minor's account will be required to sign a Declaration for Trust Accounts form CL2073 that must accompany the existing application form.
There has also been confusion about how a minor's account should be registered. As joint tutors, the parents are in the position of trustees or ''fiducies'' of the property of their minor children. An investment made on behalf of a minor should reflect this relationship. We have been notified that the Public Curator considers the following form of registration to be acceptable:
"Mr. and Mrs. Tremblay, as tutors for Jean Tremblay"; or "Charles Tremblay and Isabel Marchand as tutors for Jean Tremblay."
"Monsieur Charles Tremblay et Madame Isabel Marchand, es qualities de tuteurs de Jean Tremblay."
As in the case of any account held in trust, we require that the parents provide the usual Declaration for Trust Accounts form (CL2073).
We have been asked whether an investment may be registered directly in the name of the minor, given that the parents are already deemed to be the tutors of their children and therefore have the power to sign transfers and surrenders. Our view is that this would be acceptable, so long as both parents sign the application form. The parents should be advised, however, that registration of an account in the name of a minor may not be acceptable to the Public Curator.
You should always advise your clients that any questions regarding the appropriateness of an investment on behalf of their children should be discussed with their own lawyer. It is clear that in no circumstances should a client be told that an investment in our funds is considered to be a 'presumed sound investment' under the Civil Code.
Note: This bulletin is intended to provide general information only, and is not intended in any way to be a legal opinion concerning the laws of Quebec. Clients should be advised to consult their own lawyer for legal advice.
Taxation and Financial Planning Support